Royal Caribbean Cruises Ltd. (RCL – Free Report) and Carnival Corporation & plc (CCL – Free Report) are the two giants of the cruise industry, with market caps of $48.5 billion and $22.6 billion, respectively. Both stocks have outperformed the industry in the past year.
With the demand for the cruise industry on the rise, find out which stock has more upside potential right now. Let us take a closer look at both companies’ fundamentals, earnings growth and valuation.
Thesis on RCL
Royal Caribbean is benefiting from robust cruise demand, including new and loyal guests, as well as strong booking trends. Also, strength in consumer spending onboard and pre-cruise purchases bodes well.
The company is witnessing solid booking momentum in 2005, with the metric consistently outpacing that reported last year. The company’s advance purchase deposits (APDs) are higher than those recorded in the prior years, enabling strategic pricing and yield optimization.
Additionally, its direct-to-consumer channels are thriving, supported by expanded digital capabilities that cater to growing consumer preference for online engagement. Travel partners are also contributing significantly, generating higher bookings at elevated rates and reinforcing the company’s strong commercial positioning. As of Dec. 31, 2024, the company had $5.5 billion in customer deposits compared with $5.31 billion in the prior-year period.
The company is also focusing on innovative ship additions. The launch of the latest ships, including Icon of the Seas, Utopia of the Seas and Silver Ray, alongside investments in private destinations like Perfect Day Mexico and beach clubs in Nassau and Cozumel, enhances guest experience and competitive positioning.
Building on the strong market reception of Icon of the Seas and the anticipation surrounding Star of the Seas, the company announced plans to construct a fourth Icon-class ship, expected to join the Royal Caribbean fleet in 2027. Since its launch, Icon has transformed vacation experiences, and consistently surpassed expectations in guest satisfaction and financial outcomes. The new vessels not only enhance vacation experiences and attract fresh customers to the company’s brands but also contribute to yield improvements and overall profitability.
Thesis on CCL
Thanks to improved operational execution across its brands, Carnival has been witnessing solid booking trends for a few quarters now. In the fiscal first quarter, the company experienced another early start to a strong wave season, driven by its yield management strategy. The company’s advanced booked position remains strong, with pricing at historical highs for each quarter of fiscal 2025 and occupancy levels aligning with last year’s record.
CCL continues to generate sustained demand, even for long-term sailings. With most of fiscal 2025 already booked, strong pricing trends continue in both North America and Europe while efforts to build demand for future years remain underway. Booking volumes for 2026 sailings and beyond reached an all-time high, with prices in constant currency exceeding previous levels. The company’s booking curve remains the furthest out on record, reflecting continued demand for its offerings.
Carnival focuses on fleet expansion to drive growth. The company is actively pursuing additional initiatives to sustain its momentum and tap into untapped revenue opportunities. As mentioned before, in 2024, the company received delivery of three ships, including Sun Princess (Princess Cruise’s next-generation flagship), Carnival Jubilee (Carnival Cruise Line’s third Excel-class ship) and Queen Anne (Cunard’s first new ship in 14 years). These additions are poised to generate heightened interest and demand for their respective brands.
During the first-quarter fiscal 2025 earnings call, the company stated that it has only three ships on order over the next four years. This limited expansion supports the company’s plan to achieve investment-grade leverage metrics within 2026.
How Does Zacks Consensus Estimate Compare for RCL & CCL?
The Zacks Consensus Estimate for Royal Caribbean’s 2025 sales and EPS implies year-over-year growth of 9.1% and 25.9%, respectively. In the past 7 days, earnings estimates for 2025 have witnessed downward revisions of 0.6%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Carnival’s fiscal 2025 sales and EPS suggests year-over-year increases of 4.2% and 30.3%, respectively. In the past 60 days, earnings estimates for 2025 have witnessed upward revisions of 4.5%.
Image Source: Zacks Investment Research
Price Performance & Valuation
Royal Caribbean’s stock has risen 35.2% in the past year, significantly outpacing its industry’s fall of 16.8% and the S&P 500’s 2.3% decline. Meanwhile, Carnival shares have gained 7.6% in the same time.
Price Performance
Image Source: Zacks Investment Research
Royal Caribbean is trading at a forward 12-month price-to-earnings ratio of 11.5X, below its median of 13.66X over the last year. CCL’s forward earnings multiple sits at 8.51X, below its median of 12.9X over the same time frame.
Image Source: Zacks Investment Research
Conclusion: RCL Vs CCL
While both Royal Caribbean and Carnival are benefiting from heightened cruise demand and strong booking momentum, Carnival appears to offer a more attractive upside for investors at this stage due to its more compelling valuation. Despite RCL’s strong performance and innovation-driven growth, Carnival is trading at a significantly lower earnings multiple relative to its historical average, suggesting it may have more room for multiple expansions.
Additionally, Carnival’s steady progress in operational execution, fleet additions and long-term booking strength across global markets signal improving fundamentals that can drive its performance. For value-focused investors, CCL’s discounted valuation, upward earnings estimate revisions and momentum in booking trends make it a more appealing entry point compared with its higher-priced peer.
While CCL carries a Zacks Rank #2 (Buy), RCL currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Financial Market Newsflash
No financial news published today. Check back later.
