Have you been paying attention to shares of Royal Caribbean (RCL)? Shares have been on the move with the stock up 29.2% over the past month. The stock hit a new 52-week high of $344.62 in the previous session. Royal Caribbean has gained 48.3% since the start of the year compared to the 11.3% move for the Zacks Consumer Discretionary sector and the 10.9% return for the Zacks Leisure and Recreation Services industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 29, 2025, Royal Caribbean reported EPS of $2.71 versus consensus estimate of $2.53 while it missed the consensus revenue estimate by 0.17%.
For the current fiscal year, Royal Caribbean is expected to post earnings of $15.45 per share on $18.05 in revenues. This represents a 30.93% change in EPS on a 9.49% change in revenues. For the next fiscal year, the company is expected to earn $17.77 per share on $19.7 in revenues. This represents a year-over-year change of 15.02% and 9.14%, respectively.
Valuation Metrics
Though Royal Caribbean has recently hit a 52-week high, what is next for Royal Caribbean? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). The individual style scores for Value, Growth, Momentum and the combined VGM Score run from A through F. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Royal Caribbean has a Value Score of C. The stock's Growth and Momentum Scores are B and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 22.1X current fiscal year EPS estimates, which is not in-line with the peer industry average of 22.3X. On a trailing cash flow basis, the stock currently trades at 18.6X versus its peer group's average of 7.6X. Additionally, the stock has a PEG ratio of 1.01. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this is even more important than the company's VGM Score. Fortunately, Royal Caribbean currently has a Zacks Rank of #2 (Buy) thanks to a solid earnings estimate revision trend.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Royal Caribbean fits the bill. Thus, it seems as though Royal Caribbean shares could have potential in the weeks and months to come.
How Does RCL Stack Up to the Competition?
Shares of RCL have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Carnival Corporation (CCL). CCL has a Zacks Rank of #2 (Buy) and a Value Score of A, a Growth Score of A, and a Momentum Score of C.
Earnings were strong last quarter. Carnival Corporation beat our consensus estimate by 45.83%, and for the current fiscal year, CCL is expected to post earnings of $1.98 per share on revenue of $26.41 billion.
Shares of Carnival Corporation have gained 23% over the past month, and currently trade at a forward P/E of 14.8X and a P/CF of 7.37X.
The Leisure and Recreation Services industry is in the top 37% of all the industries we have in our universe, so it looks like there are some nice tailwinds for RCL and CCL, even beyond their own solid fundamental situation.
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Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report Carnival Corporation (CCL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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