Disney impacted as well
A relatively new entry into the cruise business, The Walt Disney Company (NYSE:DIS), has also taken a hit. Its new cruise ship, Fantasy, is expected to bring in lower earnings this year, though the company insists that this is a natural drop for a ship’s second year at sea. While that may be true, it is possible that recent bad headlines associated with cruise ships have taken their toll on The Walt Disney Company (NYSE:DIS)’s cruise enterprise, as well as the increase in fuel costs that were partially responsible for Carnival Corporation (NYSE:CCL)’s problems.
However, The Walt Disney Company (NYSE:DIS) is more diverse than the other two companies. It has an entire network of entertainment ventures that help the company’s bottom line, and alterations in the cruise industry won’t have as much of an effect, positive or negative. Going into summer, expect Disney to benefit from sales at the box office and at its theme parks more than from its cruise ships.
To invest or not to invest?
For those who have invested in cruise ship companies over the long-term, this summer won’t be nearly as good as past summers. There will still be movement among the three companies, but it doesn’t look like the recent economic upswing will translate to cruise ship passengers as much as it should for other economic sectors.
Total liabilities for all three companies have risen over the last three years, even though long-term debt has decreased. Royal Caribbean Cruises Ltd. (NYSE:RCL) seems to be the steadiest company so far, posting only a 1% increase in liabilities since 2011. This comes with an E/P (earnings-to-price ratio) of 0.63%, the lowest of the three companies, as well as a 0.56% return-on-equity, which is due to an increase in assets and a drop in shareholder equity.
Carnival Corporation (NYSE:CCL), despite its problems, is still posting an E/P of 5.85%, a good yield, and it’s a cheap buy with a forward P/E of 14.20, but these statistics may be misleading. Liabilities have increased by 5.35% over two years, and that may increase due to ship problems, which could be a red flag down the line. Return on equity is at a respectable 6.25%, though tempered expectations may result in a bit of a sell-off from stockholders. A downturn in profits will lower that ratio a bit, especially given the nature of the Triumph disaster. It is so far the only one of the three that has underperformed the S&P 500 over the last five years, which makes it less attractive as well
The Walt Disney Company (NYSE:DIS) had the biggest liability increase at 10.89% over two years, but still posts an E/P of 5.21% and a return-on-equity of 15.43%. It’s more expensive than the other two, with a forward P/E of 16.09, but probably has a better chance for long-term gains thanks to other, more successful ventures like the much-anticipated release of “The Lone Ranger” in theaters this July.
Bottom line
Disney appears to be the better bet right now simply because of its size and diversity, which can absorb cruise ship industry problems. There may be better times ahead for cruise companies once the kinks are worked out and consumer confidence goes up, but right now is not the time if Carnival’s estimates are a sign of an industry-wide problem.
It’s easy to forget that Walt Disney (NYSE:DIS) is more than just the House of Mouse. True, Disney amusement parks around the world hosted more than 121 million guests in 2011. But from its vast catalog of characters to its monster collection of media networks, much of Disney’s allure for investors lies in its diversity, and The Motley Fool’s premium research report lays out the case for investing in Disney today. This report includes the key items investors must watch as well as the opportunities and threats the company faces going forward. So don’t miss out — simply click here now to claim your copy today.
John McKenna has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!
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