Despite macroeconomic uncertainties, the travel industry’s prospects look promising, thanks to pent-up demand. Amid this backdrop, investors could watch travel stocks Cruises Ltd. (RCL), Carnival Corporation & plc (CCL), and Lindblad Expeditions Holdings, Inc. (LIND), which look poised to grow in the future.
Total travel spending in the US increased by 0.9% over June 2022 and was up 4.7% year-to-date through June 2023. Air travel demand surged 12% in June compared to the same month last year as we entered the busy summer travel season.
According to the World Travel & Tourism Council (WTTC), the travel and tourism sector grew 22% year-on-year to reach $7.7 trillion last year despite the economic and geopolitical headwinds. This recovery represented nearly 7.6% of the global economy in 2022, the highest industry contribution since 2019.
In addition, the cruise tourism market is anticipated to reach $17.8 billion by 2030, growing at a CAGR of 12%. This expansion can be ascribed to a variety of factors, including rising disposable income, an expanding middle-class population, and a growing penchant for travel. Furthermore, developments in cruise ship technology and the expansion of cruise routes to new locations are likely to fuel market growth.
The worldwide travel & tourism market is predicted to grow at a 4.4% CAGR to $1.02 trillion by 2027.
Let’s delve deeper into the fundamentals of the featured stocks.
Royal Caribbean Cruises Ltd. (RCL)
RCL operates cruises under the Royal Caribbean International, Celebrity Cruises, Azamara, and Silversea Cruises brands, which comprise a range of itineraries that call on approximately 1,000 destinations.
RCL’s trailing-12-month EBITDA margin of 23.20% is 115.5% higher than the 10.77% industry average, while its trailing-12-month levered FCF margin of 17.10% is 255.1% higher than the 4.81% industry average.
RCL’s total revenues grew 61.3% year-over-year to $2.44 billion for the second quarter that ended June 30, 2023. The company’s operating income was $771.58 million, compared to a loss of $218.64 million in the same quarter of 2022. Also, its net income and EPS came in at $462.28 and $1.70.
RCL’s revenue grew at a CAGR of 14.9% over the past three years. In addition, its EBITDA grew at a CAGR of 33.8% over the past three years.
RCL’s revenue is expected to increase by 56.3% year-over-year to $13.82 billion for the year ending December 2023. Its EPS is expected to come in at $6.12 for the same period. It has surpassed EPS estimates in all four trailing quarters. RCL’s shares have gained 137.8% over the past year to close the last trading session at $99.53.
RCL’s POWR Ratings reflect this optimistic outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
RCL has an A grade for Growth and Momentum. It is ranked first among 4 stocks in the Travel – Cruises industry. Click here for the additional POWR Ratings for Stability, Value, Sentiment and Quality for RCL.
Carnival Corporation & plc (CCL)
CCL engages in the provision of leisure travel services. The company operates a fleet of more than 90 ships that visit approximately 700 ports under AIDA Cruises, Carnival Cruise Line, Costa Cruises, Cunard, Holland America Line, Princess Cruises, P&O Cruises (Australia), P&O Cruises (UK), and Seabourn brand names.
CCL’s trailing-12-month gross profit margin of 42.05% is 18.7% higher than the 35.41% industry average. Its trailing-12-month CAPEX / Sales of 19.96% is 522% higher than the 3.21% industry average.
During the second quarter that ended May 31, 2023, CCL’s revenues increased 104.5% year-over-year to $4.91 billion. Its operating income was $120 million, compared to a loss of $1.47 billion for the second quarter of 2022. In addition, the company’s cash and cash equivalents were $4.47 billion as of May 31, 2023, compared to $4.03 billion as of November 30, 2022.
CCL’s revenue grew at a CAGR of 1.3% over the past three years. In addition, its total assets grew at a CAGR of 1.4% over the past three years.
Street expects CCL’s revenue to increase at 75.3% year-over- year to $21.33 billion for the year ending November 2023. Likewise, the company’s EPS for the ongoing year indicates a 97.4% rise year-over-year. It has surpassed the EPS estimates in three of the trailing four quarters. The stock has gained 46.9% over the past year to close the last trading session at $15.50.
The stock also has an A grade for Growth. It is ranked last in the same industry.
Beyond what is stated above, we’ve also rated CCL for Stability, Value, Sentiment and Quality. Get all CCL ratings here.
Lindblad Expeditions Holdings, Inc. (LIND)
LIND provides marine expedition adventures and travel experience worldwide. It operates through two segments Lindblad and Land Experiences.
LIND’s trailing-12-month CAPEX / Sales of 5.53% is 72.4% higher than the 3.21% industry average. Its trailing-12-month gross profit margin of 41.15% is 16.2% higher than the 35.41% industry average.
LIND’s total tour revenues increased 37% year-over-year to $124.80 million for the second quarter (ended June 30, 2023), while its current asset came in at $258.86 million for the period that ended June 30, 2023, compared to $183.32 million for the period that ended December 31, 2022.
Also, its current liabilities came in at $332.80 million compared to $341.12 million for the same period.
LIND’s revenue grew at a CAGR of 27.2% over the past three years. In addition, its EBITDA grew at a CAGR of 44.5% over the past three years.
Analysts expect LIND’s revenue to increase 35.7% year-over-year to $571.99million for the fiscal year ending December 2023. The stock has gained 26.5% year-to-date to close the last trading session at $9.78.
LIND has a B grade for Growth, and Momentum. It is ranked #2 in the same industry. To see additional LIND’s rating for Stability, Sentiment, Value, and Quality, click here.
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RCL shares were trading at $99.72 per share on Friday morning, up $0.19 (+0.19%). Year-to-date, RCL has gained 101.74%, versus a 14.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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