ZACKSยท2025-06-27 15:06Core Insights - Consumer demand for experiential travel is rebounding, benefiting cruise operators like Carnival Corporation & plc (CCL) and Royal Caribbean Cruises Ltd. (RCL) [1] - Both companies are leveraging strong brand portfolios and improving fundamentals to capitalize on elevated demand and pricing power [1] Carnival Corporation (CCL) - Carnival is achieving robust yield growth and operational momentum, exceeding its 2026 targets for EBITDA per berth growth and return on invested capital 18 months ahead of schedule [3] - The company is set to launch Celebration Key, a flagship private Caribbean destination, and is enhancing its "Paradise Collection" strategy with upgrades to existing destinations [4] - Carnival is revamping its fleet and launching a new loyalty program, Carnival Rewards, expected to boost guest engagement [5] - Financially, Carnival has refinanced $7 billion of debt and improved its net debt-to-EBITDA ratio from 4.1x to 3.7x in Q2 2025, focusing on regaining investment-grade status [6] Royal Caribbean Cruises Ltd. (RCL) - Royal Caribbean is executing its "Perfecta Performance" strategy, reporting yield growth of 5.6% and a 35% EBITDA margin in Q1 2025, driven by strong demand and pricing power [7] - The company is expanding its exclusive destination portfolio with the Royal Beach Club in Nassau, aimed at enhancing guest engagement and boosting ancillary revenues [8] - RCL's digital initiatives, including a widely adopted mobile app, are improving direct bookings and revenue capture [9] - However, RCL faces near-term cost pressures related to ship deployment and elevated expenses tied to destination rollouts and dry dock activities [10] Financial Performance and Valuation - The Zacks Consensus Estimate for Carnival's fiscal 2025 sales and EPS suggests increases of 5.4% and 38%, respectively, with earnings estimates rising 3.8% in the past 60 days [11] - For Royal Caribbean, the estimates indicate year-over-year increases of 9.4% in sales and 30.7% in EPS, with a 6% rise in earnings estimates over the same period [13] - Carnival stock has increased by 31.7% over the past three months, while Royal Caribbean shares have risen by 42.6% [15] - Carnival's forward P/E ratio is 12.92X, below the industry average of 18.59X, while RCL's is 17.92X [18] Investment Outlook - Carnival presents a more attractive near-term buying opportunity due to operational efficiency and financial gains, while RCL may require a wait-and-see approach due to cost pressures [27][28]