Cruise line stocks have meaningfully de-rated in the last three years. At YE15 the group was trading at an average 16x forward earnings, or a 2% discount to the S&P 500. Today the group trades at an average 11x forward earnings, or a 29% discount to the S&P 500. In this note we look at the factors that determine valuation (risk, returns, rewards), and how those factors have changed during this de-rating.
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Last week we saw oil prices continue to decline, we got new October data from China, and we saw insiders at VAC buying stock. We’ll discuss the impact for our coverage in four charts
NCLH reported 3Q EPS this morning. It was a good quarter and the guidance was positive. See our initial take here for a more detailed rehash.
This morning (11/08/18) NCLH reported 3Q EPS ex-items of $2.27 vs. the prior guide of $2.20, consensus of $2.21, and our $2.24 estimate. NCLH beat its constant currency net yield guide by 50bp. NCLH cited strong organic pricing across all core markets and cited particular strength in premium-priced itineraries in Alaska and Europe.
Last week about half of our coverage reported earnings, and it was another eventful week, which included timeshare stocks up nearly 20% in a day and more news flow on CZR, among other factors. We have four topical charts from our observations to highlight.
This week we had RCL, HLT, and LVS report 3Q earnings. We have one key takeaway with one key chart for each to highlight below.
RCL reported 3Q EPS this morning (10/25/18). See our initial take here with more details from the quarter. The stock traded mixed throughout the day (ended up 1%) in a very strong tape despite robust demand commentary, we think because the quarterly beat was not inspiring and some of the cost commentary on the call wasn’t particularly encouraging for 2019 earnings upside potential, as RCL cited several headwinds to costs in 2019.
EPS ex-items of $3.98, vs. the prior guide of $3.90-$3.95, consensus of $3.97, and our $4.00 estimate. RCL beat constant currency net yield guidance by 60bp versus an average beat of 140bp in the last four quarters. CCL’s beat last month was less inspiring too, so we think the buyside expectation for 3Q wasn’t that much higher than today’s result.
Last week our coverage universe sold off with the broad market, we assume mostly due to rising rates and trade tension. We have five observations with five related charts to highlight, which we think have relevance for our group.
This is a 30 page note we write each quarter where we update our thesis for each industry and company prior to earnings season with new charts. We’re also upgrading WH to Peer Perform.