On May 9, 2014, we issued an updated research report on
Royal Caribbean Cruises Ltd.
). Though the company reported dismal first quarter 2014 results on
Apr 24 with earnings and revenue missing the Zacks Consensus
Estimate, it provided a positive outlook for 2014 owing to strong
booking trends and promotional activities.
This leading cruise operator delivered adjusted earnings of 21
cents per share which were down 40.0% year over year. The
significant downside reflects cancellation or shortening of six
voyages during the first quarter, which is known to be the
strongest season for cruise companies.
The company's cruises faced disruptions due to a collision that
spilled residual fuel oil in the Gulf of Galveston, shutting the
Houston Ship Channel. In one other incident, one of the company's
cruises had to return early to New Jersey due to passengers falling
Total revenue also decreased 1.3% year over year to $1.89
billion and also missed the Zacks Consensus Estimate of $1.90
billion by 0.73% owing to a decline in net yields and currency
fluctuation. On a constant currency basis, net yields decreased
0.3% year over year due to lower passenger ticket revenue as a
result of lower boarding.
Despite dismal results, the company increased its financial
outlook for 2014 driven by a strong booking environment. Booking
volumes during the first quarter increased 16.0%. Despite pressures
in Caribbean sailings, the company has a positive outlook for the
coming quarters on solid demand for European and Chinese sailings.
It expects double digit yield improvements for both these
itineraries in 2014.
Estimates for this Zacks Rank #2 (Buy) company mostly moved
upwards in response to the strong outlook provided by the
Also, the company's revitalization efforts that call for
additional capacity and other upgrades paved the way for the
achievement of its profitability goals. As a result of these
efforts, the company has succeeded in generating improved onboard
revenues. Over the next several years, the company plans to
continue to revitalize its cruises, thereby generating
Moreover, the company is pursuing profitability improvement
initiatives aimed at generating long-term cost savings. The company
also intends to gain scale advantage by expanding its international
footprint. Driven by these factors, the company expects
profitability in 2014 to increase from the current level.
Other players in the cruise industry, which look attractive at
current levels, include
Regal Entertainment Group
Speedway Motorsports Inc.
). Investors can also consider
Wynn Resorts Ltd.
), a stock from the leisure and recreation industry. All these
stocks carry a Zacks Rank #2 (Buy).
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