Shares of Royal Caribbean Cruises Ltd. (RCL) scaled a new 52-week high of $67.83 in the first half of the trading session on Sep 12. The cruise operators’ stock closed the session at $67.21, reflecting a solid year-to-date return of 43.9%. The trading volume for the session was nearly 0.8 million shares.
We believe this Zacks Rank #1 (Strong Buy) stock has plenty of upside left, given the improving fundamentals of the cruise industry and long-term expected growth rate of 13.5%.
Growth Drivers
One of the top reasons behind Royal Caribbean’s recent high is its newest ship, which is expected to start sailing in November, this year — the Quantum of the Seas. The new ship, which begins a fresh class of vessels for the company, looks to shift the landscape of the cruise industry, and give the company a significant boost.
The Quantum will incorporate a variety of technological and entertainment features unlike any other major cruise ship in the world. These additions strive to improve some of the downsides of cruise ships and make the overall experience a whole lot better for cruisers.
Although these extra features are likely to increase the costs, Royal Caribbean could pass on the costs to the passengers. So the new ships will attract higher paying customers to cruises, thereby boosting the company’s prospects over the long term.
Additionally, on Sep 9, Royal Caribbean increased its quarterly dividend by 20% to 30 cents per share. This increased dividend will be paid to shareholders on Oct 2, 2014, of record at the close of business on Sep 22.
Thanks to the positive long-term outlook surrounding the Quantum of the Seas and the increased dividend, analysts have been upgrading their estimates for the stock. In fact, for the current quarter estimates jumped 2.8% to $2.19 per share over the last 60 days. For the current year, the estimates climbed 2.9% to $3.49 per share for 2014, over the same time period.
Other Stocks to Consider
Other stocks worth considering in the same sector include Carnival Corp. (CCL), HomeAway, Inc. (AWAY) and Diamond Resorts International, Inc. (DRII). All these stocks carry a Zack Rank #2 (Buy).
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