If the ocean was as turbulent as Royal Caribbean's
Recent operational results have not been kind to Royal Caribbean. Lowered first-quarter guidance torpedoed the share price earlier this year as management cited a weaker pricing environment for cruise booking. Difficult first-quarter trends were confirmed on Wednesday as the company announced a 93% dive in earnings. As a result, the stock continues to hover in the low $40s, 11% below highs reached in February.
Royal has a lot of paddling to do to reach its full-year earnings guidance of $3.05-$3.20. A recent acquisition of Spanish-based cruise and tour operator Pullmantur looks to be making quarterly results even more seasonal as cruise activity picks up in the summer months and toward the end of the year. But with volatility comes opportunity.
As it stands currently, Royal is trading at less than 14 times earnings for the coming year. That's a reasonable multiple, given the company's track record of growing sales and earnings in the double digits. Additionally, Royal and archrival Carnival
In other words, the growth is there, as is the moat to protect Royal -- building a cruise ship costs hundreds of millions of dollars. Shorter-term worries over booking trends, fuel prices, and hurricanes will continue to influence quarterly earnings and the stock price, but Royal and Carnival will continue to ride the industry growth wave.
For related Foolishness:
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Fool contributor Ryan Fuhrmann is long shares of Carnival and Royal Caribbean but has no financial interest in any company other mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.