Cruise line operator Royal Caribbean is Thursday's IBD Stocks To Watch pick. Travel stocks have outperformed with vacationers eager to hit the roads, skies and seas after the pandemic lockdowns.
Royal Caribbean will report second-quarter earnings on July 27. The company has topped earnings estimates in the last several quarters.
First-quarter EPS beat analysts' estimates by over 66%, following 16% and 31% upside surprises in the two quarters before that. Royal Caribbean produced only one profitable quarter in the last eight. But quarterly losses have been diminishing, and it posted a profit in Q3 of last year.
FactSet's consensus estimate is for Q2 EPS of $1.57 per share vs. a $2.08 loss in the prior year's quarter. Q3 estimates show EPS growing to $2.87.
Its forecast full-year EPS of $4.74 would be a vast improvement over the $7.50 loss in 2022. Next year's consensus EPS forecast is $6.96.
Quarterly sales are projected to grow nearly 56% to $3.404 billion vs. the prior year's second quarter. FactSet projects Q3 sales of $3.809 billion.
Growth Stock Sets Up Ahead Of Earnings
RCL stock is above the 20% profit zone of a cup base with 76.30 buy point. Shares broke out in heavy volume soon after Royal Caribbean announced first-quarter results on May 4.
The growth stock started to rally in earnest in early June, when travel stocks took off following a robust jobs report and the Senate passing the U.S. debt limit bill.
Shares steadily climbed and did a good job handling Carnival's June 26 sell-off following its Q2 earnings report.
Royal Caribbean is now finding support at the 21-day exponential moving average. The growth stock has gained over 100% this year so far.
Truist Securities raised it price target to 115 from 85 and maintained its hold rating on Tuesday. Barclays hiked its target to 113 from 100 and maintained its overweight rating Tuesday.
Growth Stock A Leader In Leisure Group
The company operates 63 ships with an additional 10 ships on order as of June 30. The cruise line travels to more than 1,000 destinations.
Its brands include Royal Caribbean International, Celebrity Cruises and Silversea Cruises. The company also has a 50% stake in two German cruise lines.
The company announced its Icon of the Seas ship on June 22. The new vessel is set for its maiden voyage in January, and will travel to Caribbean locations. Royal announced on June 29 that it reopened bookings to China and the Far East for sailings starting in April 2024.
Royal is ranked No. 3 out of 45 stocks in the leisure services group.
Follow Kimberley Koenig for more stock market news on Twitter @IBD_KKoenig.
