Royal Caribbean Cruises Ltd. Stock Downgraded (RCL)

NEW YORK ( TheStreet) -- Royal Caribbean Cruises (NYSE: RCL) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • RCL's revenue growth has slightly outpaced the industry average of 0.2%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • ROYAL CARIBBEAN CRUISES LTD has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ROYAL CARIBBEAN CRUISES LTD increased its bottom line by earning $2.78 versus $2.37 in the prior year. For the next year, the market is expecting a contraction of 35.3% in earnings ($1.80 versus $2.78).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, ROYAL CARIBBEAN CRUISES LTD's return on equity is below that of both the industry average and the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 103.9% when compared to the same quarter one year ago, falling from $93.49 million to -$3.65 million.

Royal Caribbean Cruises Ltd. operates in the cruise vacation industry worldwide. It owns five cruise brands, which comprise Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises, and CDF Croisieres de France. The company has a P/E ratio of 11.2, equal to the average leisure industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Royal Caribbean Cruises has a market cap of $5.36 billion and is part of the services sector and leisure industry. Shares are up 1.1% year to date as of the close of trading on Tuesday.

You can view the full Royal Caribbean Cruises Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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