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I rarely own a stock that doesn't pay a good and growing dividend, and you only recommend growth stocks. Do you publish a dividend-focused newsletter?



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Stock Spotlight

Royal Caribbean on cruise control

Recent Price
$112
Dividend
$1.92
Yield
1.7%
P/E Ratio
17
Shares (millions)
216
Long-Term Debt as % of Capital
42.5%
52-Week Price Range
$115.63 - $65.10



Spending on travel has held up well in recent years, a trend that has supported strong growth for Royal Caribbean Cruises ($112; RCL) and other cruise providers. The world's consumers may be cutting back on some things, but demand for cruises remains solid.

From 2009 through 2017, the number of ocean cruise passengers has increased at an annualized rate of 5.7%, according to the Cruise Lines International Association. The count has risen every year during that seven-year period, and the organization expects passenger counts to increase another 4.5% this year.

Royal Caribbean, which holds about a 25% share of the global cruise market, stands to benefit from the industrywide trends, as well some encouraging company-specific developments. With Royal Caribbean shares fetching just 16 times expected 2017 profits, 27% below the median for hotel and cruise companies in the S&P 1500 Index, we like the price of this ticket. Royal Caribbean, which earns a Quadrix Overall score of 99 and yields 1.7%, is a Buy and a Long-Term Buy.

Strong start to 2017

In April, Royal Caribbean reported better-than-expected profit growth and boosted its full-year guidance for earnings. Among the takeaways from the March-quarter report were record bookings, a 4.4% decline in net cruise costs excluding fuel, better-than-expected net yields (cruise revenue divided by available passenger cruise days), and a $500 million share-buyback authorization.

Both occupancy rates and prices have increased from last year. As of the end of March, Royal Caribbean had 15% fewer guests to book to fill out the year's inventory than at this point in 2016.

In the quarter, Royal Caribbean reported a net yield of $172 per passenger day, up from $160 a year earlier. That gain in yield is the main driver for the guidance increase. Since the earnings release, the consensus profit target for 2017 has risen 2%, while the 2018 estimate is up nearly 3%. Analysts now expect sales growth of 2% and per-share-profit growth of 19% this year.

Cruise operating expenses declined in the March quarter, and the company expects net cruise costs excluding fuel to be flat or up slightly for the full year. Fuel costs of $177 million made up 14% of total cruise costs in the March quarter, and company guidance projects a similar percentage for the full year. The combination of roughly flat nonfuel costs, consistent revenue growth, and aggressive buybacks gives us confidence Royal Caribbean can meet or beat analyst profit estimates.

Global presence

Royal Caribbean expects to operate about half of this year's capacity in the Caribbean, 15% in Europe, 21% in the Asia-Pacific region, and 4% in Alaska. The company operates more than 40 ships and serves nearly 500 destinations.

In April, Moody's raised Royal Caribbean's credit rating to investment-grade, fulfilling the company's longstanding goal and potentially reducing borrowing costs going forward. Obtain an annual report for Royal Caribbean Cruises Ltd. at 1050 Caribbean Way, Miami, FL 33132, (305) 539-6000, www.rclcorporate.com.

 


 

Royal Caribbean Cruises

 
Quarter
Per-Share Earnings
Sales Change
Quarterly Price Range
P/E Ratio Range
Mar '17
$0.99
vs.
$0.57
5%
$101.11
-
$82.72
17 - 14
Dec '16
1.23
vs.
0.94
0%
86.83
-
67.53
15 - 12
Sep '16
3.20
vs.
2.84
2%
75.72
-
65.10
14 - 12
Jun '16
1.09
vs.
0.84
2%
84.56
-
64.95
16 - 13

 
Year (Dec)
Sales (Bil.)
Per-Share Earnings*
Per-Share Dividend
52-Week Price Range
P/E Ratio Range
2016
$8.50
$6.08
$1.23
$99.81
-
$64.21
16 - 11
2015
8.30
4.83
1.35
103.40
-
65.91
21 - 14
2014
8.07
3.39
1.10
83.90
-
45.95
25 - 14
2013
7.96
2.44
0.49
47.66
-
31.35
20 - 13

 
Quadrix Scores†
Overall
Momentum
Value
Quality
Financial Strength
Earnings Estimates
Performance
99
91
72
93
61
96
84

* Earnings exclude special items.
NA Not Available.
† Quadrix® scores are percentile ranks, with 100 the best.
e Dividend and yield estimated.

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Stock Spotlight

Royal Caribbean on cruise control

Wednesday, July 19, 2017

Spending on travel has held up well in recent years, a trend that has supported strong growth for Royal Caribbean Cruises ($112; RCL) and other cruise providers. The world's consumers may be cutting back on...

Read More from Stock Spotlight

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