3 Resilient Leisure Stocks Poised for Gains Amid Industry Woes

Industry Overview - The Zacks Leisure and Recreation Services industry is currently facing challenges due to high inflation and elevated interest rates, but is benefiting from optimized business processes, strategic partnerships, and digital initiatives [1][3] - The industry includes various recreation providers such as cruise operators, theme parks, and entertainment companies, which thrive on economic growth and consumer demand [2] Current Trends - High interest rates have negatively impacted the industry, with the Federal Reserve increasing rates by 525 basis points since March 2022 to combat inflation, which has recently slowed to 2.9% in July 2024 [3] - The cruise industry is experiencing strong demand, with passenger numbers projected to reach 35.7 million in 2024, up from 31.7 million in 2023, supported by solid bookings and onboard spending [4] - Theme parks are benefiting from rising consumer spending and technological integration, leading to improved visitation and customer experiences [5] Industry Performance - The Zacks Leisure and Recreation Services industry ranks 164 out of 251 Zacks industries, placing it in the bottom 35% and indicating dull near-term prospects [6][7] - The industry's earnings estimates for 2024 have declined by 4.3% since April 30, 2024, reflecting a negative outlook from analysts [8] - Over the past year, the industry has underperformed the S&P 500, gaining only 4.4% compared to the S&P 500's increase of 27% [10] Valuation Metrics - The industry trades at a forward 12-month EV/EBITDA ratio of 56.41X, significantly higher than the S&P 500's 25.11X and the sector's 13.76X [11] Company Highlights - Royal Caribbean Cruises Ltd. (RCL): The company is benefiting from strong demand and robust booking trends, with expected sales and earnings growth of 18.1% and 69.9% respectively in 2024 [12][13] - Norwegian Cruise Line Holdings Ltd. (NCLH): The company has seen record advance ticket sales and raised its 2024 guidance, with expected earnings growth of 122.9% year over year [14] - Cinemark Holdings, Inc. (CNK): The company is optimistic about growth prospects due to recovering film volume and strong content appeal, with shares surging 64.8% in the past three months [17][18]