NEW YORK (TheStreet) -- The seas may be starting to part for long-term investors looking to come aboard Royal Caribbean Cruises' (RCL) shares, that is if the second-quarter financials are any indication of what lies ahead.
In an interview with the TheStreet, Royal Caribbean Cruises chairman and CEO Richard Fain noted that what investors witnessed financially in the second quarter was partially a byproduct of a "$1 billion" fleet-modernization initiative called the Royal Advantage that set sail "two and a half years ago."
In the second quarter ended June 30, Royal Caribbean crushed Wall Street's earnings per share expectations by $0.13 on an adjusted basis, sending the stock zooming close to 8% by midday trading. Total revenue at $1.98 billion came in line with consensus forecasts, but undoubtedly the bottom line was the true standout of the quarter. Royal Caribbean's profits benefited from a strong close in booking trends for Europe and China, which alleviated continued competitive ticket pricing in the Caribbean.
Royal Caribbean Cruises, at a market cap of $13.49 billion, is the second largest cruise ship operator based on that measure compared to Carnival Corporation (CCL) ($28.19 billion) and Norwegian Cruise Line (NCLH) ($6.61 billion). Although the company is number two in market cap, it's stock has been the best-performing amongst its peer group over past three and six months.
In the last three months, shares have gained 7.99% vs. a 3% drop for Carnival Corporation and a 4.68% rise for Norwegian Cruise Line. Expanding out to six months, Royal Caribbean's stock is the only one to have increased, to the tune of 13.55%; Carnival Corporation shares have fallen 11.76% and Norwegian Cruise Line has shed 12.18%.
According to Bloomberg data, Royal Caribbean has the lowest net profit margin and return on asset metrics relative to its aforementioned peers, at 5.34% and 2.12%, respectively. The stock's recent price appreciation may represent an early indication that some investors see the company closing the gap with competitors on net profit margins and returns. The second-quarter results went a long way to advance that notion.