Royal Caribbean Cruises Ltd. RCL posted mixed first-quarter 2015 results on Apr 20, with earnings surpassing the Zacks Consensus Estimate but revenues lagging the same. Further, the company lowered its earnings guidance for 2015, anticipating the negative impact of the currency translation as a result of a strong dollar to hit its earnings.
The product economics of the cruise business are not great, as geopolitical tensions worldwide are hurting travel and a slowdown in the Chinese economy is affecting the promising prospects in the region. Royal Carribean’s expansion into new markets may not be enough to make up for the headwinds it faces in the profitable older ones, like the Caribbean and some of the European Markets.
Royal Caribbean has seen nothing but downward revisions in analyst estimates over the past month, according to Zacks Research data. This suggests that there may be more trouble down the road, as shares of this Zacks Rank #4 (Sell) company declined almost 3.7% since its first-quarter release.
Investors, however, need not despair due to the pessimism surrounding Royal Caribbean. There are plenty of Leisure stocks with better prospects on the horizon, as is indicated by the significantly stronger Zacks Ranks these carry.
3 Alternative Stocks
The leisure industry comprises cruises, gaming, lodging, marinas, sports facilities and teams, travel and tourism, movie theaters and entertainment companies. The industry is largely driven by consumer sentiment and dependent on broad macroeconomic factors, since recreation is largely discretionary.
The leisure industry performed comparatively well in 2014 as well as so far in 2015 owing to better job prospects, stepped-up economic activities and better-than-expected GDP numbers, rising wages, cheaper fuel, improved business and renewed optimism backed by the housing recovery.
We screened the following 3 stocks, based on a solid Zacks Rank, that have excellent prospects:
Based in Milwaukee, WI, The Marcus Corp. MCS has a Zacks Rank #2 (Buy). The company operates hotels and movie theatres in the U.S.
The company’s earnings have topped the Zacks Consensus Estimate three times in the past year, twice by margins of more than 35%. Strong performance in the theatre division as well as its lodging segment and continued RevPAR improvement boosted results. The company’s shares have risen 13.2% year-to-date and with the optimism surrounding the stock, it might still have some upside left in it.
International Speedway Corp. ISCA, based in Daytona Beach, FL, promotes motorsports themed entertainment activities in the United States. The company’s motorsports entertainment facilities promote car, open wheel, sports car, truck, motorcycle and other racing events.
Earnings of this Zacks Rank #1 (Strong Buy) company have surpassed the Zacks Consensus Estimate thrice in the past year, twice by margins of more than 20%. The company’s shares have gained 16% year-to-date and with the optimism surrounding the stock, it might still gain some more.
Broomfield, CO-based Vail Resorts Inc. MTN operates mountain resorts and urban ski areas in the U.S. The company operates in three segments: Mountain, Lodging, and Real Estate. The company’s bottom line fared better than the Zacks Consensus Estimate in all of the trailing four quarters and carries a Zacks Rank #2.
The company’s geographic diversity, which is reflected in its presence in most of the markets of the U.S., should drive revenues in the long term. The company’s shares rose 13.2% year-to-date and with the estimates going north, some more improvement might be on the cards.
To Conclude
The outlook for the leisure industry for 2015 remains positive as it focuses on innovative and inspired ways of meeting customers’ expectations. However, issues like a slowdown in China, tensions in Ukraine and a struggling Eurozone, especially Greece remain the concerns.
Nevertheless, given the ongoing economic recovery in the U.S., fast infrastructure development in the regions where these companies operate and opportunities in the emerging markets, these leisure stocks are worth investing in the near term.
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