10 Best Travel and Leisure Stocks to Buy Now

6) Royal Caribbean Cruises Ltd. (NYSE:RCL)

Number of Hedge Fund Holders: 56

Royal Caribbean Cruises Ltd. (NYSE:RCL) is the world’s second-largest cruise company, which operates ~63 ships throughout 5 global and partner brands in the cruise vacation industry.

The company reported its first quarter results, with its earnings per share (EPS) and adjusted EPS coming at $1.35 of $1.77, respectively. Stronger pricing on close-in demand, strength in onboard revenue along with favorable timing of expenses all supported the company’s 1Q 2024 results.

Royal Caribbean Cruises Ltd. (NYSE:RCL) is one of the stocks which should benefit from the rate cut by the US Fed. It has ~$20.2 billion of debt as at March 2024, which reflects a decline from $21.1 billion in the prior year. Because of its cash reserve balance of US$437.0 million, its net debt is less, coming at ~$19.7 billion. Its liabilities, which are due within 12 months, came at $9.91 billion. However, liabilities of US$20.0 billion are due beyond 12 months.

However, the company became profitable in its last quarter. This provided some sigh of relief to the investors. In 1Q 2024, its net income was $360 million or $1.35 per share as compared to net loss of $(48) million or $(0.19) per share in same period of the previous year.

Adjusted EPS might grow 60% YoY to $10.70 - $10.90. The increase in earnings consists of a $0.10 headwind associated with stronger dollar and increased fuel prices. However, ~1/3^rd of this increase is attributable to 1Q 2024 performance with the remainder mainly aided by better business outlook and expectation of reduced interest expense.

In 1Q 2024, there were 56 hedge funds holding positions in Royal Caribbean Cruises Ltd. (NYSE:RCL).

Diamond Hill Capital, an investment manager, published its first-quarter 2024 investor letter. Here is what the company said:

“As valuations have risen, it has become increasingly challenging to find high-quality companies trading at interesting valuations. Accordingly, we didn’t initiate any new long positions during the quarter. However, we did introduce three new short positions, including Powell Industries, Royal Caribbean Cruises Ltd. (NYSE:RCL) and YETI Holdings.

Royal Caribbean Group (RCL) is the second largest player in a cruise industry in which size and scale matter. While the company has benefited from strong demand since the pandemic’s end, we believe the valuation has outpaced the fundamentals and find the risk/reward on the short side attractive.”