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Here's Why Carnival Can Really Cruise
Not everyone believes that we will experience a sharp economic recovery in the next year or two, or that a sharp rebound in travel spending is in the cards during that same time. However, the affordability of cruise lines has caught my interest. Let's take a look at Carnival (NYSE:CCL) ahead of its third-quarter earnings, which are due out on September 22.
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Why Carnival Will Float High
Cruises remain affordable and with fuel prices down, the prospect for margins is improving. Also a slightly better economy suggests that those that do take a sail are probably going to be more likely to spend on gifts, merchandise, gambling and drinks, which can be big cash makers for the large lines.
Carnival's bottom line prospects are very appealing. Currently Wall Street expects it to earn $2.05 a share this year, which I think is very achievable, as is the $2.11 estimate for 2010.
As far as the quarter that's about to be announced, analysts are looking for the company to earn $1.18. Given that it has beaten expectations four quarters straight there is a good chance it will beat again. The rebound in the economy that w've seen over the last few months leaves me optimistic. (For more on analyst expectations, be sure to read Analyst Forecasts Spell Disaster For Some Stocks.)
Other Travel Plays That Warrant A Glance
Royal Caribbean Cruises (NYSE:RCL) is hard to look past. While it doesn't appear to be as good a value at this point because it trades at more than 32 times this year's estimate, I do think there is a chance it could make a new 52-week high. I also think that things are going to be better in the next year for them than they were in the last.
Another long-term play on travel, but not cruise travel, is Boeing (NYSE:BA). True, it is sort of an indirect play, but it does make high profile, widely used airplanes. It is presently expected to earn $2.43 per share this year and $4.42 next year.
As far as the airlines go, you could also consider Southwest (NYSE:LUV). The company is expected to break even on an EPS basis this year and to earn 30 cents next year. (Want a primer on the airline industry? Check our Airline Industry Industry Handbook.)
The Bottom Line
Cruise lines excite me and Carnival is my top pick in that space. I like its earnings potential, think it's a better deal than Royal Caribbean. Watch for it to beat estimates again in this quarter.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: Seven Ways To Position Yourself For Recovery
Why Carnival Will Float High
Cruises remain affordable and with fuel prices down, the prospect for margins is improving. Also a slightly better economy suggests that those that do take a sail are probably going to be more likely to spend on gifts, merchandise, gambling and drinks, which can be big cash makers for the large lines.
Carnival's bottom line prospects are very appealing. Currently Wall Street expects it to earn $2.05 a share this year, which I think is very achievable, as is the $2.11 estimate for 2010.
As far as the quarter that's about to be announced, analysts are looking for the company to earn $1.18. Given that it has beaten expectations four quarters straight there is a good chance it will beat again. The rebound in the economy that w've seen over the last few months leaves me optimistic. (For more on analyst expectations, be sure to read Analyst Forecasts Spell Disaster For Some Stocks.)
Royal Caribbean Cruises (NYSE:RCL) is hard to look past. While it doesn't appear to be as good a value at this point because it trades at more than 32 times this year's estimate, I do think there is a chance it could make a new 52-week high. I also think that things are going to be better in the next year for them than they were in the last.
Another long-term play on travel, but not cruise travel, is Boeing (NYSE:BA). True, it is sort of an indirect play, but it does make high profile, widely used airplanes. It is presently expected to earn $2.43 per share this year and $4.42 next year.
As far as the airlines go, you could also consider Southwest (NYSE:LUV). The company is expected to break even on an EPS basis this year and to earn 30 cents next year. (Want a primer on the airline industry? Check our Airline Industry Industry Handbook.)
The Bottom Line
Cruise lines excite me and Carnival is my top pick in that space. I like its earnings potential, think it's a better deal than Royal Caribbean. Watch for it to beat estimates again in this quarter.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Glenn Curtis
Glenn Curtis started his career as an equity analyst at Cantone Research, a New Jersey-based regional brokerage firm. He has since worked as an equity analyst and a financial writer at a number of print/web publications and brokerage firms including Registered Representative Magazine, Advanced Trading Magazine, Worldlyinvestor.com, RealMoney.com, TheStreet.com and Prudential Securities. Curtis has also held Series 6,7,24 and 63 securities licenses.
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