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5 Leisure and Recreation Services Stocks to Buy for 2H 2024
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The leisure and recreation services industry is benefiting from the optimization of business processes, consistent strategic partnerships and digital initiatives. This space primarily thrives on overall economic growth, which fuels consumer demand for products. Demand, highly dependent on business cycles, is propelled by a healthy labor market, strong consumer spending and a growing disposable income.
The industry faced hurdles in the past three years due to a record-high inflation and interest rate and an extremely tight monetary control adopted by the Fed. Wall Street market participants have turned optimistic about interest rate cuts by the Fed following the recently released soft economic readings.
The CME FedWatch tool currently shows a 73.3% probability of a Fed fund rate cut by 25 basis points in September. This probability was around 62% just a week ago. Moreover, the interest rate derivative tool also shows a 72.7% probability of two rate cuts by the end of 2024.
The cruise industry is benefiting from strong demand for cruising and accelerating booking volumes. The industry is benefiting from solid bookings concerning North American and European sailings. Also, strong pricing (on closer-in-demand) and solid onboard spending bode well for the industry.
According to the Cruise Lines International Association (CLIA), the number of passengers embarking on cruises is projected to reach 35.7 million in 2024, suggesting an increase from 31.5 million in 2023.
Moreover, the theme park industry has been benefiting from robust demand. Theme Park operators have been gaining from improving visitation. Consumer spending at theme parks continues to rise. The theme park business is experiencing a boost from integrating technology, mainly through augmented and virtual reality.
Recently, an increasing number of theme parks have started incorporating advanced technology into their attractions and exhibits to elevate the overall experience. Live entertainment firms have benefited from pent-up demand for live events and robust ticket sales.
Our Top Picks
We have narrowed our search to five leisure and recreation services stocks that have strong growth potential for the rest of 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Royal Caribbean Cruises Ltd. (RCL - Free Report) has been benefiting from strong cruising demand from new and loyal guests and robust booking trends. Moreover, RCL gains from strength in consumer spending onboard and pre-cruise purchases.
RCL emphasized investing in a modern digital travel platform to streamline the vacation booking process for customers and expand wallet share. Also, RCL emphasized new innovative ships and onboard experiences to boost its offering and deliver superior yields and margins.
Royal Caribbean Cruises has an expected revenue and earnings growth rate of 16.9% and 64%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days.
Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) is constantly looking to expand its fleet size, which is currently at 32. During the first quarter of 2024, NCLH’s newbuild pipeline increased from five to 13 ships. It is set to introduce its final Allura Class Ship under the Oceania Cruises brand, which is on order for delivery in 2025.
NCLH’s diversified product offerings and services through its three globally recognized brands aid it in garnering demand growth across all markets. During the first quarter of 2024, NCLH reported solid and resilient consumer demand across three of its brands in all markets. This resulted in a record bookings position in the quarter, which further drove a continued all-time-high 12-month-forward booked position, extending into 2025.
Norwegian Cruise Line has an expected revenue and earnings growth rate of 9.3% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.9% over the last 60 days.
OneSpaWorld Holdings Ltd. (OSW - Free Report) operates health and wellness centers onboard cruise ships and at destination resorts worldwide. OSW’s health and wellness centers offer services, such as traditional body, salon, and skin care services and products, self-service fitness facilities, specialized fitness classes, and personal fitness training, pain management, detoxifying programs, and body composition analyses, weight management programs and products, and medi-spa services.
OSW also provides its guests access to beauty and wellness brands, including ELEMIS, Grown Alchemist, Kérastase, Dysport, Restylane, Thermage, CoolSculpting, truSculpt 3D, truSculpt iD, Good Feet, and Hyperice with various brands offered in the cruise market.
OneSpaWorld Holdings has an expected revenue and earnings growth rate of 10.4% and 28.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the last 60 days.
Trip.com Group Ltd. (TCOM - Free Report) operates as a travel service provider for accommodation reservation, transportation ticketing, packaged tours and in-destination, corporate travel management, and other travel-related services in China and internationally.
TCOM’s service consists of Trip.com, Ctrip, Skyscanner and Qunar. TCOM’s platform includes mobile apps, Internet websites and 24/7 customer service centers. TCOM also provides independent leisure travelers bundled packaged-tour products comprising group, semi-group, and customized and packaged tours with various transportation arrangements, including air, cruise, bus, and car rental services.
Trip.com Group has an expected revenue and earnings growth rate of 17.3% and 12.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.1% over the last 60 days.
Travel + Leisure Co. (TNL - Free Report) provides hospitality services and travel products in the United States and internationally. TNL operates in two segments, Vacation Ownership and Travel and Membership.
The Vacation Ownership segment of TNL develops, markets, and sells vacation ownership interests (VOIs) to individual consumers, as well as provides consumer financing in connection with the sale of VOIs, and property management services at resorts.
The Travel and Membership segment of TNL operates various travel businesses, including three vacation exchange brands, travel technology platforms, travel memberships, and direct-to-consumer rentals. This segment also offers private-label travel booking technology solutions.
Travel + Leisure has an expected revenue growth rate of 3.9% for the current year. Although its earnings growth rate is negative for the current year, it is 12.3% for next year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days.
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5 Leisure and Recreation Services Stocks to Buy for 2H 2024
The leisure and recreation services industry is benefiting from the optimization of business processes, consistent strategic partnerships and digital initiatives. This space primarily thrives on overall economic growth, which fuels consumer demand for products. Demand, highly dependent on business cycles, is propelled by a healthy labor market, strong consumer spending and a growing disposable income.
The industry faced hurdles in the past three years due to a record-high inflation and interest rate and an extremely tight monetary control adopted by the Fed. Wall Street market participants have turned optimistic about interest rate cuts by the Fed following the recently released soft economic readings.
The CME FedWatch tool currently shows a 73.3% probability of a Fed fund rate cut by 25 basis points in September. This probability was around 62% just a week ago. Moreover, the interest rate derivative tool also shows a 72.7% probability of two rate cuts by the end of 2024.
The cruise industry is benefiting from strong demand for cruising and accelerating booking volumes. The industry is benefiting from solid bookings concerning North American and European sailings. Also, strong pricing (on closer-in-demand) and solid onboard spending bode well for the industry.
According to the Cruise Lines International Association (CLIA), the number of passengers embarking on cruises is projected to reach 35.7 million in 2024, suggesting an increase from 31.5 million in 2023.
Moreover, the theme park industry has been benefiting from robust demand. Theme Park operators have been gaining from improving visitation. Consumer spending at theme parks continues to rise. The theme park business is experiencing a boost from integrating technology, mainly through augmented and virtual reality.
Recently, an increasing number of theme parks have started incorporating advanced technology into their attractions and exhibits to elevate the overall experience. Live entertainment firms have benefited from pent-up demand for live events and robust ticket sales.
Our Top Picks
We have narrowed our search to five leisure and recreation services stocks that have strong growth potential for the rest of 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Royal Caribbean Cruises Ltd. (RCL - Free Report) has been benefiting from strong cruising demand from new and loyal guests and robust booking trends. Moreover, RCL gains from strength in consumer spending onboard and pre-cruise purchases.
RCL emphasized investing in a modern digital travel platform to streamline the vacation booking process for customers and expand wallet share. Also, RCL emphasized new innovative ships and onboard experiences to boost its offering and deliver superior yields and margins.
Royal Caribbean Cruises has an expected revenue and earnings growth rate of 16.9% and 64%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days.
Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) is constantly looking to expand its fleet size, which is currently at 32. During the first quarter of 2024, NCLH’s newbuild pipeline increased from five to 13 ships. It is set to introduce its final Allura Class Ship under the Oceania Cruises brand, which is on order for delivery in 2025.
NCLH’s diversified product offerings and services through its three globally recognized brands aid it in garnering demand growth across all markets. During the first quarter of 2024, NCLH reported solid and resilient consumer demand across three of its brands in all markets. This resulted in a record bookings position in the quarter, which further drove a continued all-time-high 12-month-forward booked position, extending into 2025.
Norwegian Cruise Line has an expected revenue and earnings growth rate of 9.3% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.9% over the last 60 days.
OneSpaWorld Holdings Ltd. (OSW - Free Report) operates health and wellness centers onboard cruise ships and at destination resorts worldwide. OSW’s health and wellness centers offer services, such as traditional body, salon, and skin care services and products, self-service fitness facilities, specialized fitness classes, and personal fitness training, pain management, detoxifying programs, and body composition analyses, weight management programs and products, and medi-spa services.
OSW also provides its guests access to beauty and wellness brands, including ELEMIS, Grown Alchemist, Kérastase, Dysport, Restylane, Thermage, CoolSculpting, truSculpt 3D, truSculpt iD, Good Feet, and Hyperice with various brands offered in the cruise market.
OneSpaWorld Holdings has an expected revenue and earnings growth rate of 10.4% and 28.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the last 60 days.
Trip.com Group Ltd. (TCOM - Free Report) operates as a travel service provider for accommodation reservation, transportation ticketing, packaged tours and in-destination, corporate travel management, and other travel-related services in China and internationally.
TCOM’s service consists of Trip.com, Ctrip, Skyscanner and Qunar. TCOM’s platform includes mobile apps, Internet websites and 24/7 customer service centers. TCOM also provides independent leisure travelers bundled packaged-tour products comprising group, semi-group, and customized and packaged tours with various transportation arrangements, including air, cruise, bus, and car rental services.
Trip.com Group has an expected revenue and earnings growth rate of 17.3% and 12.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.1% over the last 60 days.
Travel + Leisure Co. (TNL - Free Report) provides hospitality services and travel products in the United States and internationally. TNL operates in two segments, Vacation Ownership and Travel and Membership.
The Vacation Ownership segment of TNL develops, markets, and sells vacation ownership interests (VOIs) to individual consumers, as well as provides consumer financing in connection with the sale of VOIs, and property management services at resorts.
The Travel and Membership segment of TNL operates various travel businesses, including three vacation exchange brands, travel technology platforms, travel memberships, and direct-to-consumer rentals. This segment also offers private-label travel booking technology solutions.
Travel + Leisure has an expected revenue growth rate of 3.9% for the current year. Although its earnings growth rate is negative for the current year, it is 12.3% for next year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days.