Royal Caribbean Cruises Ltd.
) delivered solid third quarter results last week and provided an
upbeat guidance, sending earnings estimates sharply higher in the
past 7 days. Shares of this Zacks #1 Rank (Strong Buy) cruise
company also reached a 52-week high on the day of the announcement
and have appreciated 41.3% in the past 3 months.
Sturdy Third Quarter
On October 25, Royal Caribbean posted adjusted earnings of $1.68
per share, which breezed past the Zacks Consensus Estimate by
15.9%. Efficient cost control measures were a big part of this
Total revenue decreased 4.1% year over year to $2,226.4 million,
but surpassed the Zacks Consensus Estimate of $2,214.0 million. Net
yield nudged up 0.1% year over year on a constant-currency basis.
Total cruise operating expenses dropped 4.1% to $1,348.3 million.
Net cruise costs, excluding fuel, increased 2.0% on a
constant-currency basis (down 0.2% on reported basis).
Encouraging 2012 Guidance
For full-year 2012, management raised its earnings per share
guidance to between $1.85 and $1.95 from the range of $1.70 to
$1.80. Anticipation of strong revenue generation, cost reduction,
and currency benefits net of oil price increases led to the hike.
The net revenue yield for 2012 is expected to increase 3% at
constant currency (previous range was 2-3%).
Earnings Momentum on the Rise
In the past 30 days, the Zacks Consensus Estimate for fiscal 2012
climbed 9.1% to $1.92 per share on the back of upward revisions to
all nine estimates.
For fiscal 2013, the Zacks Consensus Estimate is $2.47 per share,
marking an increase of 4.7% over the same timeframe. The current
estimate suggests year-over-year growth of 28.4%.
Royal Caribbean's valuation looks compelling compared with its
peers by most metrics. The company is currently trading at a
forward price-to-earnings (P/E) of 17.05x, an 8.5% discount to the
peer group average of 18.64x. The price-to-book of 0.86x is at a
25.2% discount to the peer group average of 1.15x. Valuation looks
attractive with respect to the price-to-sales (P/S) ratio as well.
The P/S ratio of the company stood at 0.98, a 10.1% discount to the
peer group average of 1.09. Moreover, the company's long-term
estimated earnings per share growth rate remains strong at 9.7%.
Chart Reflects Strength
Royal Caribbean has been continuously outperforming its 50-day
moving average over the past three months, showing a steady growth
trend. The stock has also been consistently trading above its
200-day moving average since August 28, 2012. The year-to-date
return for the stock is approximately 39.3%, compared with the
S&P 500's return of 13.5%. Volume is fairly strong, averaging
roughly 1,805K daily.
Founded in 1968 and headquartered in Miami, Florida, Royal
Caribbean operates 41 ships in the cruise vacation industry. The
company has five cruise brands - Royal Caribbean International,
Celebrity Cruises, Pullmantur, Azamara Cruises and CDF Croisières
de France. Additionally, it also has a 50% stake in a joint venture
with TUI AG, which operates the brand TUI Cruises. The company
currently has three ships under construction. With a market
capitalization of $7.52 billion, Royal Caribbean primarily competes
with Carnival Corp. (
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