Cruise Stocks Climb Amid New Offerings, Upbeat Outlook

Travel stocks have had a rough start to 2025. But underneath the surface, one pocket of the travel industry continues to make waves.

Momentum has begun to swarm in cruise stocks. Credit and debit card data from Bank of America showed monthly cruise spending in March increased 6.4% year-over-year compared to a 4.5% yearly gain in February. Cruise spending leapt 15.6% from the prior month versus a 3.5% drop in overall travel spending.

With the tide smoothing over for cruise liners, is it time to hop aboard?

The Zacks Rundown

The Zacks Leisure and Recreation Services industry group currently ranks in the top 38% out of approximately 250 Zacks Ranked Industries. Because this group is ranked in the top half of all industries, we expect it to outperform the market over the next 3 to 6 months.

Note the favorable metrics for this industry group below:

Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.

It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.

Royal Caribbean Stands Out, Carnival Close Behind

Leading cruise and vacation company Royal Caribbean Cruises RCL is a component of this industry group and has seen its stock soar to all-time highs. Based in Miami, Royal Caribbean Cruises operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. The company also has a 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises.

RCL stock boasts a Zacks Growth Style Score of B and top overall VGM Score of A. The cruise liner has exceeded earnings estimates in each of the past four quarters, sporting an average 8.7% beat during that timeframe.

In the first quarter, Royal Caribbean reported a profit that exceeded forecasts, simultaneously boosting its outlook as the company benefited from higher prices and lower costs. The cruise liner delivered first-quarter adjusted earnings per share of $2.71, which beat the Zacks Consensus Estimate of $2.53 by 7.1%. In the prior-year quarter, RCL recorded an adjusted EPS of $1.77. First-quarter revenues increased 7.3% year-over-year to $4 billion.

Royal Caribbean CEO Jason Liberty stated that as the company steers through "the complexities of the current macroeconomic landscape, we remain focused on what we can control—delivering the best vacation experiences, optimizing revenue, and managing costs, while continuing to invest in our future and drive further differentiation. The combination of the world-class experiences we deliver, continued strong secular tailwinds and the persistent value gap to land-based vacation positions us well to navigate the current environment.”

April bookings surpassed levels from the same period last year, backed by healthy close-in demand. The company stated that 2025 bookings remain on track, with cancellation levels within normal ranges.

Royal Caribbean’s strategic focus on innovative ships and private destinations should boost pre-cruise purchases and onboard spending. Management emphasized that ongoing consumer enthusiasm tied to new offerings — including Star of the Seas, Celebrity Xcel and the Royal Beach Club Paradise Island — is generating strong consumer interest.

Royal Caribbean now sees full-year adjusted EPS in a range of $14.55-$15.55, up from its previous guidance of $14.35 to $14.65.

Analysts covering Royal Caribbean remain bullish and have increased their full-year earnings estimates by 3.98% in the past 60 days. Its bottom-line is projected to rise 30.7% year-over-year in 2025 (to $15.42 per share), while Wall Street anticipates its top line to improve by 9.4% ($18.03 billion).

Royal Caribbean rival Carnival CCL operates a fleet of more than 90 ships that visit approximately 700 ports. The company provides destination services under recognized brand names such as AIDA, Carnival, Costa, Princess, and Seabourn. Carnival sells its cruises primarily through travel agents, tour operators, vacation planners, and websites.

Carnival is witnessing an encouraging lift in onboard revenues, highlighting a strategic shift that is aiding its bottom line. In the first quarter of fiscal 2025, onboard revenues grew approximately 10% year-over-year and accelerated relative to the prior quarter. 

CCL stock remains well below its January highs but has soared nearly 50% off the April lows:

The fundamentals are backing up the price movement. The company’s bottom line is projected to surge 30.3% in fiscal 2025 to $1.85 per share on 4.1% higher revenues ($26.1 billion). Carnival has exceeded the earnings mark in each of the prior four quarters, delivering a trailing four-quarter average earnings surprise of 458.4%.

What the Zacks Model Unveils

The Zacks Earnings ESP (Expected Surprise Prediction) seeks to find companies that have recently seen positive earnings estimate revision activity. The idea is that this recent information can serve as a more accurate predictor of the future, which can give investors a leg up during earnings season.

The technique has proven to be quite useful in finding positive surprises. In fact, when combining a Zacks Rank #3 or better with a positive Earnings ESP, stocks delivered a positive surprise 70% of the time according to our 10-year back test.

CCL is a Zacks Rank #3 (Hold) and boasts an +8.42% Earnings ESP. Another beat may be in the cards when the company reports its fiscal Q2 results on June 24^th (estimated announcement date).

Make sure to keep an eye on these cruise stocks as we head into the summer months.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research