Royal Caribbean Navigates the Fuel Undertow

The undertow of high fuel costs continues to drag on Royal Caribbean (NYSE: RCL  ) , but its sights are set on successfully navigating the favorable industry tailwinds.

Royal's second-quarter revenue sailed ahead nearly 15% on strong ticket sales and stronger onboard revenue from gambling, alcohol, spa services operated by the likes of Motley Fool Rule Breakers pick Steiner Leisure (Nasdaq: STNR  ) , and gifts and other goods. But higher fuel costs slowed earnings growth to 5.3%, even though management managed to control other costs swimmingly.

Full-year company guidance now stands below previous expectations at $2.75-$2.85, assuming that fuel costs won't do any further unexpected damage to the bottom line. In any case, Royal plans to keep expansion brisk over the next five years, with a 9.3% increase in cruise ship capacity over this time frame.

This is consistent with growth rates seen in cruising since the 1970s. Royal and larger archrival Carnival (NYSE: CCL  ) (NYSE: CUK  ) collectively account for the bulk of industry capacity and growth, though Disney (NYSE: DIS  ) also operates a couple of cruise ships, as do smaller regional players.

Throw in a reasonable valuation for Royal and a 1.5% dividend yield, and the struggling stock may be worth throwing a life preserver. I don't see much upside as long as fuel continues to mute any potential near-term gains. But short-term pain can prove a good way to prepare for long-term growth, and the industry should have plenty of that is it increasingly expands overseas.

For related Foolishness:

• How to Cruise Royal Caribbean
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Disney is a Stock Advisor selection. To see what other great companies are recommendations in Stock Advisor, take a free 30-day trial today. Steiner is a Rule Breakers pick.

Fool contributor Ryan Fuhrmann is long shares of Royal and Carnival, but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.