Royal Caribbean Cruise Limited (RCL) is seeing a stable booking environment as travelers who have stayed home the last several years are finally heading to more exotic ports of call. RCL has a PEG ratio of just 0.9.
Royal Caribbean Cruises operates a global cruise company under the brands Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Cruises and CDF Croisieres de France.
It has 38 ships that visit 280 ports in 81 countries on six continents.
Has the Casual Traveler Returned?
On July 22, Royal Caribbean reported its second quarter results which saw revenue rise 23% to $1.6 billion from $1.3 billion in 2009 due to capacity increases and yield improvement.
2009 was a tough year on the leisure industry and Royal Caribbean was no exception.
Earnings per share rose to 28 cents per share compared to a loss of 16 cents in the second quarter of last year. It also surprised on the Zacks consensus by 47%, or 9 cents.
The company has turned it around on the earnings surprises having now beaten each of the last 4 quarters. You can see from this 5-year surprise chart, that it was a little more dicey during the heart of the recession.
Operating costs were lower in the quarter primarily due to strong cost control, energy conservation, expense timing and currency fluctuations.
Raised Full Year Guidance
The company acknowledged uncertainty in the economy in July but said its profitability continued to improve and its booking environment remained stable.
It raised its full year guidance by 10 cents to the range of $2.25 to $2.35 per share. This contrasts with 2009 which saw EPS of just 75 cents.
Zacks Consensus Estimates Climb
Analysts have been weighing in on 2010 and 2011 in the last month even though the company reported several months ago.
1 estimate was raised for 2010 which pushed up the Zacks Consensus to $2.34 per share which is, obviously, at the high end of the company’s guidance range.
For 2011, 1 estimate has moved up and 1 has fallen in the last month as the Zacks Consensus moved up to $2.71 from $2.70 per share. This is earnings growth of 15.9%.
We’ll have to wait until Nov 3 for further news from the company as that’s when it is scheduled to report third quarter results.
A Value Stock With Some Growth
Royal Caribbean is expected to grow its earnings by 15% over the next 5 years.
Combined with cheap valuations and this stock has a PEG ratio under 1.0.
It’s forward P/E is not super low, at 14.1, but that is under its peers at 16.5.
The company also has a price-to-book ratio of 1.0 with its peers trading at 1.1. To top off its value credentials, RCL also has a price-to-sales ratio of 1.1 which is well within the value parameters.
Royal Caribbean is a Zacks #1 Rank (strong buy) stock.
(And yes, I wanted to book a cruise after reading up on RCL.)
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.
ROYAL CARIBBEAN (RCL): Free Stock Analysis Report
Zacks Investment Research
