Royal Caribbean vs. Carnival, Which Stock is the Better Buy?

Two of the leading cruise liners in the industry include Royal Caribbean (RCL) and Carnival (CCL). As two large cruise liners, they have similar strengths and weaknesses. Nonetheless, there are distinctions between the two stocks which might lead you to prefer one stock over the other.

Key differences that should be taken into account for both stocks come from the value present, growth projections, and earnings expectations. After an analysis, we’ll take the stats into account and come to a conclusion for which stock should be your preference.

Value

Royal Caribbean is a Zacks Rank #3 (Hold). It has a beta of 2.39 and doles out a dividend yield of 1.49%. The cruise liner is trading at a forward PE of 17.31. It has a price to sales of 2.19. It has an earnings yield of 5.78%, which is significantly higher than the industry average of 3.92%. RCL also has a debt to equity of 0.94.

Carnival is a Zacks Rank #2 (Buy), has a beta of 1.2, and investors of the stock receive a 2.02% dividend yield. CCL has a forward PE of 19.87, and has a P/S of 1.83. The earnings yield on the stock is 5.03%. Carnival Corporation has a debt to equity of 0.3.

Growth

Royal’s EPS is expected to be 36.01% higher year over year for 2015. The current cash flow growth is 18.89%. It’s also worth mentioning that the company has a net profit margin of 9.78%, which is much higher than the industry’s as a whole, which is 5.84%. RCL has a trailing twelve month ROE of 8.85%, with projected sales growth of 4.12%.

Carnival’s EPS is projected to grow by 25.64% compared to last year. The current cash flow growth is 12.02%. The net margin for Carnival also beats the industry average, with a profit margin of 8.21%. CCL has an ROE of 6.92%, but its sales growth is expected to decrease by 1.7% this year.

Earnings

In the last 60 days, 2 analysts have raised their earnings estimates for this quarter, while one has lowered their EPS expectations for Royal. 90 days ago, our consensus saw the EPS for this quarter being estimated to be $1.09. However, our consensus has been updated since then, and now calls for earnings of $0.72 per share this quarter. Royal Caribbean has beaten on our consensus estimate in three of the last four quarters, and by an average of 11.48% per quarter. RCL reports its earnings on 7/23/15.

Carnival’s EPS was projected to end up being $1.70 90 days ago, according to our consensus. Now, our consensus estimates that we’ll be seeing earnings of $1.58 per share. Carnival has beaten our earnings consensus in each of the last four quarters, not to mention that it has done so by an average of 57.77% per quarter. CCL announces its earnings on 9/22/15.

Bottom Line

Royal’s got Carnival beat on growth, hands down. However, the stats would go on to suggest that Carnival Corporation is a more valuable buy, most notable with the debt to equity of 0.3, the better price to sales, and dividend yield.