Travel stock Royal Caribbean Group is forming a cup pattern within a larger consolidation. The company reports earnings on Thursday and is Tuesday's IBD 50 Stocks To Watch pick.
Cruise stocks are picking up steam, as travel demand has been booming and people gladly put the pandemic in the rearview mirror.
Royal Caribbean shares have gained 35% this year so far. The stock popped this week in sympathy with Norwegian Cruise Line, after its rival posted a positive Q1 earnings report Monday.
"The consumer is still strong. The consumer is buying cruise tickets," said Mark Kempa, Norwegian Cruise Line chief financial officer, in the earnings news release.
Norwegian cited "healthy" demand and said that its target consumer "remains resilient with a persistent desire for travel and experiences."
In addition, Norwegian cited bundled airfare as a plus, because it can be booked in advance to lock in prices.
Cruises are attracting a younger passenger base, according to a Wall Street Journal article. "We see more millennials and Gen Z sailing with us than ever before," said Kara Wallace, chief marketing officer at Royal Caribbean International.
Miami-based Royal Caribbean travels to over 270 destinations in more than 60 countries on six continents.
Its cruise lines include Royal Caribbean International, Celebrity Cruises and Silversea Cruises, and it has ownership in Germany-based TUI Cruises and Hapag-Lloyd Cruises.
RCL stock is ranked No. 5 out of 46 stocks in the Leisure-Services industry group, which holds the 49th spot out of 197 IBD industry groups.
Travel Stock Regained 115% From Summer's Low
Shares got a 6.1% lift on Friday, in heavier-than-average daily volume, after JPMorgan Chase initiated coverage of RCL with an overweight rating and a 94 price target. JPMorgan sees 2025 earnings growing from annual capacity growth and daily revenue per passenger growth, also known in the industry as yield.
Royal Caribbean hit resistance at the 50-day moving average in March and April. But shares popped above the line Monday, also in heavier volume, following Norwegian Cruise's earnings. Royal Caribbean stock is now well on its way with a cup base with a 76.40 buy point.
The travel stock is about 15% off the 79.29 52-week high marked exactly one year ago Wednesday. RCL gained about 115% from its July 14, 2022, low.
Earnings Expected To Grow 75%
Royal Caribbean reports Q1 earnings Thursday morning. FactSet estimates a 69 cent quarterly loss per share, a dramatic improvement over the $4.57 loss per share one year ago.
After two years of losses due to the Covid pause, FactSet estimates are for full-year $3.42 earnings per share this year and $5.96 in 2024. The improvement still doesn't bring Royal back to its 2019 $9.54 EPS.
First-quarter sales are projected at $2.822 billion, a 166% increase over the prior year's quarter. Annual sales are forecast at $12.957 billion, showing massive growth from the $8.841 billion in 2022.
The occupancy rate is expected to be 98.7%, up from 85.1% in December. The occupancy rate measures the percentage of cabins filled vs. available.
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