Analysts react to Royal Caribbean Investor Day

Investing.com -- Royal Caribbean Group held its investor day on Tuesday, highlighting long-term earnings growth and expansion plans, but its shares fell 6% on the day amid broader market concerns.

Analysts at Bank of America and Citi weighed in on the event.

BofA reiterated its Neutral rating and noted that RCL’s “Perfecta Program” is expected to drive 20% EPS CAGR through 2027, with EPS exceeding $20.

“While the market is focused on near-term consumer concerns, RCL highlighted no change in their consumer’s behavior, and we expect these investor day goals will be a data point investors re-visit as market concerns ease.”

A key focus for RCL is said to be gaining a larger share of the $2 trillion travel market.

“At $80B, the cruise industry is 4% of the vacation market, and a 1% shift in hotel demand to cruise could fill 6 Icon (NASDAQ: ICLR) class ships… while a 5% shift in vacation wallet share could fill a similar amount of ships,” BofA noted.

On capital returns, BofA observed that RCL’s leverage target of sub-3x is very reasonable and could reach sub-2x if the company avoids further stock buybacks beyond its current $1 billion authorization.

Citi analysts pointed out that a 2027 EPS target above $20 was already expected.

The bank wrote: “Going into Tuesday, however, $20+ on 2027 EPS was widely expected by investors, and RCL shares (-6% in Tuesday trading) were swept up in broader fears of a consumer retrenchment associated with a developing trade war, stubborn inflation, and persistent rates.”

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