Royal Caribbean Doesn't Cave to Pier Pressure

Royal Caribbean beats Wall Street estimates.

Jan 27, 2014 at 11:08AM
Ccl

Royal Caribbean (NYSE:RCL) had a rough weekend, as more than 600 passengers and crew members on the Explorer of the Seas fell victim to a gastrointestinal illness.Thankfully, the seas aren't as rough this morning after the cruise line posted encouraging quarterly results. 

Revenue rose 3% to $1.854 billion as guests spent more money once onboard than last year. The bottom-line results showed far more dramatic improvement, with adjusted earnings more than doubling to $0.23 a share. Analysts were only holding out for net income of $0.18 a share, but that isn't a surprise. Royal Caribbean has sailed past the prognosticators in each of the four previous quarters.

The outlook for 2014 is encouraging. Royal Caribbean reported that bookings are in line with historical patterns. There's pricing pressure in the Caribbean, where a desperate Carnival (NYSE:CCL) is still discounting berths to fill its vessels after several embarrassing, if not tragic, journeys over the past two years. However, Royal Caribbean is experiencing firming rates in Europe and Asia. It now sees a profit of $3.20 to $3.40 a share in the year ahead, while analysts are presently docked at $3.17 a share. When we factor in the undeniable trend of Royal Caribbean consistently coasting past its own guidance in recent quarters, it wouldn't be a shock to see it earn more than it is publicly projecting.

Royal Caribbean is attractively priced here. It's fetching just 14 times the midpoint of projected profitability, and the 2.1% yield is a welcome bonus for income investors. Carnival may pack a more bountiful 2.6% yield, but it's out of favor with passengers and trades at a lofty 23 times this year's expected earnings. Norwegian Cruise Line (NASDAQ:NCLH) has been public for a year, and while it is growing faster than Carnival and Royal Caribbean, it trades at 16 times this year's profit target and has yet to start shelling out quarterly dividends. 

This is good time to consider buying into Royal Caribbean. Don't let the Explorer of the Seas mishap scare you away.

The Centers for Disease Control and Prevention reported on Sunday that 577 passengers and 49 crew members aboard the Explorer of the Seas began experiencing vomiting and diarrhea during the 10-day voyage. That's a sliver of the 3,050 passengers and crew of 1,165, but the contagious nature of the malady was enough to send the ship back to its home port two days early. These incidents happen from time to time across all cruise lines. It's an unfortunate event, but it's not going to rough up Royal Caribbean's reputation to the level that Carnival has seen since its series of disrupted sailings in 2012 and 2013. 

It's the right time to buy into the industry. The economy is showing signs of life, and Carnival will eventually repair its reputation to the point where all players can start increasing their prices on Caribbean sailings. Royal Caribbean is the cheapest of the three on an earnings basis, and its recent streak of blowing Wall Street's profit estimates out of the water suggest that the stock will be a market beater in the near term.

Bon voyage, investors.

6 more stocks that should continue to sail higher
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers