Dj Royal Caribbean Group Stock Outperforms Competitors On Strong Trading Day

Ralph Lauren Corporation’s RL shares have risen 2.8% in the past week, following its robust second-quarter fiscal 2025 results on Nov. 7, before market open. The bottom and top lines beat the Zacks Consensus Estimate. Results gained from robust demand and brand strength. Margins were also robust in the fiscal second quarter. The company has raised the revenue and adjusted operating margin view for the current fiscal year, backed by strength in brands and favorable business trends.

The company’s digital business, including its directly-operated sites, departmentstore.com, pure players and social commerce, is quite impressive. Ralph Lauren’s "Drive the Core and Expand for More" initiative has strategically positioned it for success.

RL stock has gained quite steadily over the past year. The stock has rallied 88.8% in a year, impressively outperforming the Zacks Textile - Apparel industry’s 6.9% growth, the broader Consumer Discretionary sector’s 23.5% rise and S&P 500 index’s 38.4% increase.

Now let’s assess the company’s fiscal second-quarter results, outlook and other factors to make a better judgement on the stock.

More on RL’s Q2 Results & Outlook

Ralph Lauren’s adjusted earnings per share of $2.54 surpassed the Zacks Consensus Estimate of $2.43 and increased 21% from the year-earlier quarter’s figure. Net revenues grew 6% year over year to $1.72 billion and beat the consensus estimate of $1.67 billion. On a constant-currency (cc) basis, revenues were up 6% from the year-ago quarter. The top line witnessed growth across all regions, driven by brand strength, pricing efforts and continued strategic investments.

RL's Price Performance

Global direct-to-consumer comparable store sales (comps) jumped 10%, backed by continued brand elevation, double-digit increases in average unit retail (AUR) and positive retail comps at all regions. Adjusted gross profit margin expanded 160 basis points (bps) year over year. This was mainly driven by positive product, channel and geographic mix shifts, reduced cotton costs and AUR growth in all regions. Also, the adjusted operating margin increased 90 bps year over year.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

For fiscal 2025, RL now anticipates year-over-year revenue growth (at cc) to be in the band of 3-4%, up from the prior guided range of 2-3%. Management now expects the operating margin to grow in the range of 110-130 bps at cc on higher gross margin and leveraged operating costs. Earlier, management had predicted the operating margin to increase in the band of 100-120 bps. The gross margin is likely to increase in the band of 80-120 bps in cc compared with 50-100 bps expected earlier.

For the fiscal third quarter, management anticipates revenues to grow nearly 3-4% on a cc basis. Operating margin is likely to expand around 100-140 bps in cc on higher gross margins.

RL’s Estimates Reflect a Positive Trend

Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for Ralph Lauren’s fiscal 2025 EPS (earnings per share) has increased 2.7%. The consensus estimate for fiscal 2026 earnings has risen 2.9% in the past 30 days.

For fiscal 2025, the Zacks Consensus Estimate for RL’s sales and EPS implies 3.5% and 12.4% growth, respectively, year over year. For fiscal 2026, the consensus mark for sales and EPS indicates 3.4% and 11.9% year-over-year increase, respectively.

Analyzing Ralph Lauren’s Core Strengths

RL has been making investments in key priorities such as marketing, digital capabilities and expansion of ecosystem across the major cities. The company’s direct-to-consumer (DTC) channels, comprising stores and digital-commerce sites offering elevated shopping experiences, have been performing well. Ralph Lauren is making significant progress in expanding digital and omnichannel capabilities via investments in mobile, omnichannel and fulfillment.

The company has also been reinforcing its international presence for a while. RL saw positive retail comparable-store sales at all regions in the most recent quarter. Its strategy, which includes product elevation, personalized promotions, disciplined inventory management and a favorable channel and geographic mix, is proving effective.

Ralph Lauren’s stock performance is due to its progress on ‘Next Great Chapter: Accelerate Plan’ and digital efforts. As part of the plan, the company is focused on elevating its lifestyle brand, expanding core and other businesses and strengthening its presence in key cities. It is enhancing its global lifestyle brands by offering premium products that align with evolving consumer preferences.

RL’s shareholder-friendly moves have been boding well. The company repurchased nearly $100 million of Class A common stock in the most recent quarter. RL returned about $375 million to shareholders via dividend and repurchases of Class A common stock. It paid a regular quarterly cash dividend of 82.50 cents per share in the fiscal second quarter, totaling $98.9 million in the first six months.

RL Stock’s Valuation

Ralph Lauren’s stock is trading at a discount valuation relative to the industry. Going by the price/sales ratio, the stock is currently trading at 1.91 on a forward 12-month basis, lower than 2.02 for the industry. Also, the stock is trading much lower than its five-year high of 2.03.

Final Words on RL Stock

RL stock seems attractively valued. Robust strategies, shareholder-friendly initiatives and strong cash flow generating ability are major tailwinds. RL has been seeing a rise in earnings estimates as well. Hence, we suggest investors to include this Zacks Rank #2 (Buy) company in their portfolio.

Other Stocks to Consider

We have highlighted three other top-ranked stocks, namely, G-III Apparel Group GIII, Gildan Activewear GIL and Royal Caribbean RCL.

G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

GIII Apparel has a trailing four-quarter earnings surprise of 571.8%, on average. The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales indicates growth of 3.3% from the year-ago figure.

Gildan Activewear, a manufacturer of premium quality branded basic activewear, carries a Zacks Rank of 2 at present. GIL has a trailing four-quarter earnings surprise of 5.2%, on average.

The consensus estimate for Gildan Activewear’s current financial-year EPS indicates growth of 14% from the year-ago figure.

Royal Caribbean carries a Zacks Rank of 2 at present. RCL has a trailing four-quarter earnings surprise of 18.5%, on average.

The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates an increase of 17.8% and 67.8%, respectively, from the year-ago levels.

Zacks Investment Research

Shares of Norwegian Cruise Line Holdings Ltd. NCLH have rallied 75.7% in the past six months, outperforming the Zacks Leisure and Recreation Services industry’s growth of 14%.

The company’s impressive third-quarter 2024 results anchored by resilient demand, elevated onboard offerings and targeted growth strategies have positioned it ahead of competitors. In the same time frame, stocks like Carnival Corporation & plc CCL, Royal Caribbean Cruises Ltd. RCL and OneSpaWorld Holdings Limited OSW have gained 69%, 66.8% and 30.9%, respectively.

NCLH Price Performance

Live Nation Entertainment, Inc.'s LYV third-quarter 2024 earnings surpassed the Zacks Consensus Estimate but revenues missed the same. The top and bottom lines declined from the prior-year quarter’s level.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Following the results, the company shares gained 7.6% during the after-hours trading session yesterday. Positive investor sentiments were witnessed as the company shared its outlook on expanding growth opportunities, driven by an unprecedented summer concert season and a record-breaking show pipeline.

Despite the one-time accrual impacts on operating income, Live Nation anticipates achieving double-digit AOI (Adjusted Operating Income) growth in 2024. Also, it stated optimism for continued momentum into 2025, with a more extensive lineup of stadium, arena and amphitheater shows to meet high fan demand.

LYV’s Q3 Earnings & Revenues

During the third quarter, the company reported adjusted earnings per share (EPS) of $1.66, surpassing the Zacks Consensus Estimate of $1.58 by 5.1%. In the year-ago quarter, the company reported an adjusted EPS of $1.93.

Live Nation Entertainment, Inc. Price, Consensus and EPS Surprise

Live Nation Entertainment, Inc. price-consensus-eps-surprise-chart | Live Nation Entertainment, Inc. Quote

Revenues amounted to $7.7 billion, missing the consensus mark of $7.8 billion. The top line declined 6.2% year over year from $8.2 billion.

Segmental Discussion

Concerts: The segment’s revenues totaled $6.6 billion, down 6% year over year. Our model predicted the metric to fall 0.4% year over year. AOI was $474.1 million, up 39% from the year-ago figure.

Ticketing: Segmental revenues amounted to $693.7 million, down 17% from the prior-year quarter level. Our model estimated the metric to decline 0.9% year over year. AOI was $235.7 million, down 33% year over year.

Sponsorship & Advertising: Revenues from this segment totaled $390.3 million, up 6% from the year-ago quarter’s figure. We estimated the metric to decline 0.4% year over year. AOI was $275.3 million, up 10% year over year.

Other Financial Information

Live Nation's cash and cash equivalents as of Sept. 30, 2024, totaled $5.5 billion, up from $6.23 billion as of Dec. 31, 2023. At the end of the third quarter, goodwill was $2.67 billion compared with $2.69 billion at the end of 2023. Net long-term debt came in at $5.67 billion compared with $5.46 billion as of Dec. 31, 2023.

At the end of the first nine months of 2024, net cash provided by operating activities was $680.1 million compared with $754.6 million reported in the year-ago period.

LYV’s Zacks Rank

Live Nation currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

Recent Consumer Discretionary Releases

Royal Caribbean Cruises Ltd. RCL posted impressive third-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis.

In the quarter, the company exceeded its guidance, driven by stronger pricing on close-in demand, continued growth in onboard revenues and reduced costs due to timing factors. The company has raised its outlook for 2024 and reported elevated demand patterns heading into 2025.

Mattel, Inc. MAT reported impressive third-quarter 2024 results, wherein the adjusted earnings and net sales topped the Zacks Consensus Estimate. The top line surpassed the consensus estimate after missing it for three consecutive quarters. On a year-over-year basis, net sales declined while adjusted earnings grew.

The company’s quarterly results benefited from its Optimizing for Profitable Growth program along with the focus on its multi-year strategy to expand its IP-driven toy business and entertainment offering. Although the top line was adversely impacted by reduced sales from both the reportable segments, the bottom line showed resilience through operational efficiencies.

Hilton Worldwide Holdings Inc. HLT reported third-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. Both the metrics increased on a year-over-year basis.

The company's performance was backed by notable improvements in RevPAR, attributed to higher occupancy rates and average daily rates. Furthermore, in the quarter, Hilton opened 531 new hotels. It achieved net room growth of 33,600. As of Sept. 30, 2024, Hilton's development pipeline comprised nearly 3,525 hotels, with almost 492,400 rooms across 120 countries and territories — including 28 countries and regions with no running hotels. For 2024, the company expects net unit growth in the range of 7-7.5%.

Zacks Investment Research

Royal Caribbean Cruises Ltd shares are trading higher by 3.82% to $233.87 Monday afternoon. Tigress Financial maintained its Buy rating on the stock and raised its price target from $210 to $270 a share.

The stock has surged to a new all-time high following Donald Trump's victory in the 2024 U.S. presidential election, signaling investor optimism about the company’s prospects under the newly-elected Republican administration.

What To Know: Trump's proposed economic policies, including tax cuts and regulatory rollbacks, could be seen as a boon for large corporations like Royal Caribbean, which stands to benefit from a more business-friendly environment.

One of the key factors boosting RCL is Trump’s promise to extend corporate tax cuts from the 2017 Tax Cuts and Jobs Act, which would reduce corporate tax rates and increase profits for major companies.

Read Also: Small Caps, Financials Rally As Bitcoin Blasts Past $85,000: What’s Driving Markets Monday?

These tax cuts would likely provide Royal Caribbean with greater flexibility in managing its costs, particularly as the cruise industry continues to recover post-pandemic.

Additionally, Trump's more relaxed regulatory approach, especially in the areas of environmental and safety standards, could reduce operational hurdles for the cruise line.

Furthermore, Trump's economic policies are expected to stimulate consumer spending, especially in the travel and tourism sectors, which directly benefits Royal Caribbean.

His push for deregulation and the potential revival of consumer confidence under a Republican-controlled government could boost discretionary spending, driving demand for luxury travel experiences, including cruises.

Read Also: Trump Trade Sparks Biggest Financial Stock Inflows In 2 Years

How To Buy RCL Stock

Besides going to a brokerage platform to purchase a share – or fractional share – of stock, you can also gain access to shares either by buying an exchange traded fund (ETF) that holds the stock itself, or by allocating yourself to a strategy in your 401(k) that would seek to acquire shares in a mutual fund or other instrument.

For example, in Royal Caribbean’s case, it is in the Consumer Discretionary sector. An ETF will likely hold shares in many liquid and large companies that help track that sector, allowing an investor to gain exposure to the trends within that segment.

According to data from Benzinga Pro, RCL has a 52-week high of $234.17 and a 52-week low of $93.80.

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Launched on 08/13/2013, the Schwab Fundamental U.S. Small Company ETF (FNDA) is a smart beta exchange traded fund offering broad exposure to the Style Box - Small Cap Value category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

Managed by Charles Schwab, FNDA has amassed assets over $9.72 billion, making it one of the largest ETFs in the Style Box - Small Cap Value. This particular fund seeks to match the performance of the Russell RAFI US Small Co. Index before fees and expenses.

The RAFI Fundamental High Liquidity US Small Index measures the performance of small U.S. companies based on their fundamental size and weight.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

With one of the cheaper products in the space, this ETF has annual operating expenses of 0.25%.

FNDA's 12-month trailing dividend yield is 1.32%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector - about 20.50% of the portfolio. Financials and Consumer Discretionary round out the top three.

When you look at individual holdings, Echostar Corp Class A (SATS) accounts for about 0.44% of the fund's total assets, followed by Royal Caribbean Group Ltd (RCL) and Abercrombie And Fitch Class A (ANF).

The top 10 holdings account for about 2.59% of total assets under management.

Performance and Risk

The ETF has added roughly 15.16% and was up about 35.15% so far this year and in the past one year (as of 11/11/2024), respectively. FNDA has traded between $23.57 and $31.58 during this last 52-week period.

The ETF has a beta of 1.18 and standard deviation of 21.42% for the trailing three-year period, making it a medium risk choice in the space. With about 1041 holdings, it effectively diversifies company-specific risk.

Alternatives

Schwab Fundamental U.S. Small Company ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

Avantis U.S. Small Cap Value ETF (AVUV) tracks ---------------------------------------- and the Vanguard Small-Cap Value ETF (VBR) tracks CRSP U.S. Small Cap Value Index. Avantis U.S. Small Cap Value ETF has $15.13 billion in assets, Vanguard Small-Cap Value ETF has $32.46 billion. AVUV has an expense ratio of 0.25% and VBR charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Zacks Investment Research