Bank Of America Raises Projections For Cruise Line Stocks: 'More Insulated From The Airline Trends'

Bank of America analysts have expressed optimism about the cruise line industry ahead of upcoming earnings reports, forecasting potential stock price increases.

The analysts highlighted that U.S. airlines are facing pricing challenges due to overcapacity and demand concerns, as noted by Ryanair in their latest earnings report.

“We view cruise as more insulated from the airline trends given longer booking curves (9+ months vs 3 months) and different supply dynamics,” Andrew G. Didora, CFA, wrote in a note published Tuesday.

The expert sees minimal risk to near-term earnings and expects cruise companies to continue reporting strong fundamentals this earnings season, similar to Carnival Corp.’s CCL recent solid results and raised guidance at the end of June.

Bank of America Raised Royal Caribbean, Norwegian Cruise Price Targets

Royal Caribbean Cruise Ltd. RCL is set to announce its Q2 2024 earnings this Thursday, July 25.

“We believe our current RCL estimates are reasonable ahead of results,” Didora said. Bank of America estimates a net yield of +11.0% in Q2 2024, slightly above the high end of guidance at +10-10.5%.

Given the strong trends anticipated in the cruise sector, Bank of America has raised the price objective for Royal Caribbean Cruise Ltd. to $172, while maintaining a Neutral rating.

Norwegian Cruise Line Holdings NCLH hosted an investor day at the end of May, and Bank of America anticipates similar messaging in the July 31 earnings call: focusing on deleveraging, keeping unit costs below inflation, and achieving mid-single digit net yield growth.

Bank of America’s full-year 2024 estimated EBITDA is $2.3 billion (aligning with the Street and slightly above the guidance of $2.25 billion), with their Q2 2024 EPS estimate slightly ahead of guidance at 33 cents compared to the guidance of 32 cents (Street 34 cents).

For Q3 2024, they forecast net yields of +5.9% versus the Street’s +5%, with EPS of 94 cents compared to the Street’s 90 cents.

Bank of America has raised the price objective to $23 as they increase their target multiple, reflecting the continued strong industry trends, while maintaining a Neutral rating.

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