) is recovering at a steady pace from its close competitor
Carnival's ship grounding in January this year and consequent dip
in passenger confidence. Although the economic turmoil in Europe
continues to nag the company, the extreme upheaval seems to have
dispersed. The company's increased earnings guidance and
third-quarter top- and bottom-line consensus beat are indicative of
The company also experienced a slight increase in on-board revenue
in the third quarter and its cost containment efforts are also
paying off. Relatively stabilized booking patterns, cost
containment efforts, fuel conservation initiatives, increasing
exposure to countries like China in order to tap the developing
cruise travel market and the slowdown in industry capacity are
positives for the shares.
Hence, we upgrade the recommendation from Neutral to Outperform.
Our six-month target price of $40.00 per share equates to about
20.4x our estimate for 2012. The target price implies an expected
return of 19.3% over that period.
ROYAL CARIBBEAN (RCL): Free Stock Analysis
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