Topline
Cruise stocks sailed Thursday after the largest line dramatically upped its outlook for this year as the industry badly battered by the pandemic rebounds.
Key Facts
In an earnings release, Royal Caribbean bumped its full-year adjusted earnings forecast by nearly 50% from $3 to $3.60 per share to $4.40 to $4.80 per share, now projecting its best-ever year, while its losses and revenues both topped analyst expectations.
Shares of the world’s largest cruise line by market value spiked 8% in early trading, tacking on $1.2 billion in market capitalization and hitting their highest price since February.
It was an “impressive” earnings beat, Wells Fargo analysts led by Daniel Politzer wrote in a Thursday note to clients, maintaining their $78 price target, implying 6% upside.
“This was the best quarterly cruise result vs. expectations we have seen in many years,” concurred Truist analysts Patrick Scholes and Gregory Miller.
Competitor lines Carnival and Norwegian rallied about 4% apiece Thursday thanks to Royal Caribbean-fueled optimism.
The three cruise goliaths have now tacked on some $20 billion in market capitalization since March 2020, though the trio’s $36 billion in market value is still far shy of their pre-pandemic level.
Crucial Quote
“A rising tide that lifts all boats” should further boost cruise stocks as the sector continues to enjoy a resurgence as travel restrictions wane, Melius analysts Conor Cunningham and Daragh Regan wrote in a note to clients last month. Bookings are at their highest-level ever and occupancy is on pace to hit a record rate by year’s end, according to Melius, allowing the companies to flex their “pricing power” muscles and improve margins.
Key Background
In 2020, Norwegian’s stock sank to its lowest price ever, shares of Carnival sank to a two-decade low and Royal Caribbean’s stock crashed to an eight-year low as Covid-19 forced the companies to cancel all trips for several months—and called into question the long-term future of the industry reliant on tight quarters and international travel. The U.S. Centers for Disease Control and Prevention dropped its cruise-specific Covid guidelines last July. Royal Caribbean, Carnival and Norwegian subsequently ended their respective Covid vaccination requirements.
Is the cruise industry coming back? After more than 2 years under a COVID cloud, the answer is yes. (USA Today)
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