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Royal Caribbean Cuts 2020 View, Stock Continues to Sink

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Zacks Equity Research
·3 min read
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Royal Caribbean Cruises Ltd. RCL continues to suffer due to the coronavirus outbreak in China. Travel warnings and cruise cancellations are starting to take a toll on the company. In fact, the outbreak has compelled management to further trim 2020 guidance. In the past month, the company’s shares have fallen 23.4%, compared with the industry’s decline of 8.7%.

The company announced that it has put travel restriction on those who have travelled from, to or through mainland China or Hong Kong in the past 15 days. The coronavirus outbreak has persuaded the company to cancel 30 cruises in Southeast Asia. The company has also modified several itineraries.

The company now expects earnings to be down by 90 cents due to the cancellation of cruises. Notably, it had previously projected 2020 earnings to be impacted by 65 cents. The company further added that if it has to cancel remaining cruise sailings in Asia through the end of April, it would hurt earnings by another 30 cents.


 

China remains of utmost importance to the Royal Caribbean brand. According to 2020 Cruise Industry News Annual Report, China constitutes 7.6% of the global cruise industry. Notably, the outbreak of the COVID-19 virus resulted in the cancellation of a number of voyages in other parts of Asia.

While cruise business from China and Asia fell significantly, bookings for the broader business outside Asia has also softened recently thanks to travel restrictions to contain the spread of the contagion.

Other major cruise operates like Carnival Corporation & Plc CCL and Norwegian Cruise Line Holdings Ltd. NCLH have witnessed a sharp decline of 20.8% and 27.4% in the past month, respectively.

Zacks Rank & a Key Pick

Royal Caribbean currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same space include WW International, Inc. WW carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

WW International has an impressive long-term earnings growth rate of 15%.

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Carnival Corporation (CCL) : Free Stock Analysis Report
 
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
 
Norwegian Cruise Line Holdings Ltd. (NCLH) : Free Stock Analysis Report
 
WW International, Inc. (WW) : Free Stock Analysis Report
 
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