Royal Caribbean Cruises (NYSE: RCL) and Carnival Corporation (NYSE:CCL) are both large-cap consumer discretionary companies, but which is the better business? We will compare the two companies based on the strength of their dividends, profitabiliy, valuation, institutional ownership, risk, earnings and analyst recommendations.

Insider & Institutional Ownership

71.1% of Royal Caribbean Cruises shares are held by institutional investors. Comparatively, 78.3% of Carnival Corporation shares are held by institutional investors. 15.3% of Royal Caribbean Cruises shares are held by insiders. Comparatively, 23.8% of Carnival Corporation shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Royal Caribbean Cruises and Carnival Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Royal Caribbean Cruises $8.59 billion 2.88 $2.52 billion $6.47 17.76
Carnival Corporation $16.77 billion 2.89 $4.79 billion $3.76 17.82

Carnival Corporation has higher revenue and earnings than Royal Caribbean Cruises. Royal Caribbean Cruises is trading at a lower price-to-earnings ratio than Carnival Corporation, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Royal Caribbean Cruises and Carnival Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Royal Caribbean Cruises 1 1 15 0 2.82
Carnival Corporation 1 7 14 0 2.59

Royal Caribbean Cruises currently has a consensus target price of $104.74, suggesting a potential downside of 8.85%. Carnival Corporation has a consensus target price of $60.08, suggesting a potential downside of 10.33%. Given Royal Caribbean Cruises’ stronger consensus rating and higher probable upside, research analysts plainly believe Royal Caribbean Cruises is more favorable than Carnival Corporation.

Dividends

Royal Caribbean Cruises pays an annual dividend of $1.92 per share and has a dividend yield of 1.7%. Carnival Corporation pays an annual dividend of $1.60 per share and has a dividend yield of 2.4%. Royal Caribbean Cruises pays out 29.7% of its earnings in the form of a dividend. Carnival Corporation pays out 42.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Royal Caribbean Cruises has raised its dividend for 5 consecutive years and Carnival Corporation has raised its dividend for 2 consecutive years.

Profitability

This table compares Royal Caribbean Cruises and Carnival Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Royal Caribbean Cruises 16.29% 15.91% 6.30%
Carnival Corporation 16.48% 11.26% 6.52%

Volatility and Risk

Royal Caribbean Cruises has a beta of 1.06, indicating that its stock price is 6% more volatile than the S&P 500. Comparatively, Carnival Corporation has a beta of 0.75, indicating that its stock price is 25% less volatile than the S&P 500.

Summary

Carnival Corporation beats Royal Caribbean Cruises on 9 of the 17 factors compared between the two stocks.

Royal Caribbean Cruises Company Profile

Royal Caribbean Cruises Ltd. is a cruise company. The Company owns and operates three global cruise brands: Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises (Global Brands). The Company also own joint venture interest in the German brand TUI Cruises, interest in the Spanish brand Pullmantur and interest in the Chinese brand SkySea Cruises (collectively, Partner Brands). Together, its Global Brands and its Partner Brands operate a combined total of 49 ships in the cruise vacation industry with an aggregate capacity of approximately 123,270 berths as of December 31, 2016. As of December 31, 2016, the Company’s ships offer a selection of itineraries that call on approximately 535 destinations in 105 countries, covering all seven continents. Royal Caribbean International offers a range of itineraries to the destinations, including Alaska, Asia, Australia, Canada, the Caribbean, the Panama Canal and New Zealand with cruise lengths that range from 2 to 24 nights.

Carnival Corporation Company Profile

Carnival Corporation is a leisure travel company. The Company is a cruise company of global cruise guests, and a provider of vacations to all cruise destinations throughout the world. The Company operates in four segments: North America, EAA, Cruise Support and, Tour and Other. The Company’s North America segment includes Carnival Cruise Line, Holland America Line, Princess Cruises (Princess) and Seabourn. The Company’s Cruise Support segment represents certain of its port and related facilities and other services that are provided for the benefit of its cruise brands and Fathom’s selling, general and administrative expenses. Its EAA segment includes AIDA Cruises (AIDA), Costa Cruises (Costa), Cunard, P&O Cruises (Australia), P&O Cruises (the United Kingdom) and ship operations of Fathom. Its Tour and Other segment represents the hotel and transportation operations of Holland America Princess Alaska Tours and three ships that the Company bareboat charter to unaffiliated entities.

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