The firm sees the industry maintaining its growth with solid “close-in bookings.” There has been a slight dip in Carnival’s Costa brand, but all in all the cruise industry was shown to be holding true with its latest pricing strategy. Credit Suisse even thinks that this concept is not fully reflected in Wall Street estimates and could bring more upside. Improved pricing, solid cost controls, reasonable capacity growth and a tailwind from lower energy prices are all added boosts.
Credit Suisse was mindful of China as a wild card in its view. The firm said that potential macro-economic challenges ahead in China keep it cautiously optimistic for the cruise industry and its further development in the Asia-Pacific region. The firm showed that Royal Caribbean currently has the most exposure to China, and it expects investors to be extremely focused on any cracks in demand and pricing — which might not be transparent until 2016.
Another note is that patience is required on the Cuba hype. Carnival’s Fathom does not sail until in May 2016, and approvals from the Cuban government are still in the works. The firm thinks that this could set the tone for future cruise approvals.
Credit Suisse’s pecking order is Carnival first, Norwegian second and Royal Caribbean third. Its research note came with the caveat that its pricing survey is only one channel check against many other data points. The firm has an increased confidence in Norwegian’s 2017 earnings per share target of $5.00, while it raised its EPS estimates as follows: 2016 to $3.92 from $3.81, and 2017 to $4.70 from $4.31.
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