Personal Finance
RCL

Why Royal Caribbean Cruises Stock Just Dropped 5.5%

Cruise ship in calm waters

What happened

Carnival Corporation (NYSE: CCL) stock got rocked by a mediocre earnings report , compounded by an earnings warning earlier today -- but Carnival wasn't the only casualty. Now, rival Royal Caribbean Cruises (NYSE: RCL) is suffering from the sell-off, as well, and down 5.5% as of 2:40 p.m. EST -- not as bad as Carnival's 10.5% decline, true, but bad enough.

So what

With most market indexes down severely today, it's possible that Royal Caribbean's share-price slide can be dismissed with a glib, "Well, all stocks are down today." I suspect, though, that the reason Royal Caribbean stock is down so much more than most other stocks can be traced directly back to the details contained in Carnival's report.

To recap, Carnival experienced a marked slowdown in its rate of revenue growth in its fiscal Q4, with sales growth that had been averaging 8% all year long slowing to less than 5% in the year's final quarter. Profits at Carnival actually declined in Q4, and management noted that it suffered from "a significant drag from [expensive] fuel and [unfavorable] currency [exchange rates]."

Cruise ship in calm waters

Royal Caribbean investors could really use a safe port in a storm right about now. Image source: Getty Images.

Now what

These, of course, are factors investors can expect to affect Royal Caribbean, as well, potentially foreshadowing an earnings disappointment when Royal Caribbean reports its own fourth-quarter results next month. That being said, Carnival did note, in issuing guidance for the new year, that it expects these headwinds to dissipate in 2019 and for "changes in fuel prices (including realized fuel derivatives) and currency exchange rates ... to increase earnings by $0.14 per share compared to the prior year." [ emphasis added ]

Before selling Royal Caribbean stock as a knee-jerk reaction to Carnival's earnings disappointment, investors might want to ponder those words.

10 stocks we like better than Royal Caribbean

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Royal Caribbean wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 14, 2018

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

RCL CCL

Other Topics

Stocks

Latest Personal Finance Videos

    #TradeTalks: The Changing E-Commerce Landscape

    e-Commerce Consultant James Thomson joins Jill Malandrino on Nasdaq #TradeTalks to discuss the changing e-commerce landscape, what consumers should prepare for as we head into shopping season and why you shouldn’t do last minute shipping.

    3 days ago

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More