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

Insider and Institutional Ownership

78.8% of Carnival Corporation shares are owned by institutional investors. Comparatively, 71.7% of Royal Caribbean Cruises shares are owned by institutional investors. 23.8% of Carnival Corporation shares are owned by company insiders. Comparatively, 15.3% of Royal Caribbean Cruises shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Carnival Corporation 16.48% 11.26% 6.52%
Royal Caribbean Cruises 17.73% 16.71% 6.94%

Earnings & Valuation

This table compares Carnival Corporation and Royal Caribbean Cruises’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Carnival Corporation $16.77 billion 2.94 $4.79 billion $3.76 18.09
Royal Caribbean Cruises $8.68 billion 2.97 $2.67 billion $7.12 16.83

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.

Risk and Volatility

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

Dividends

Carnival Corporation pays an annual dividend of $1.60 per share and has a dividend yield of 2.4%. Royal Caribbean Cruises pays an annual dividend of $1.92 per share and has a dividend yield of 1.6%. Carnival Corporation pays out 42.6% of its earnings in the form of a dividend. Royal Caribbean Cruises pays out 27.0% 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. Carnival Corporation has increased its dividend for 5 consecutive years and Royal Caribbean Cruises has increased its dividend for 2 consecutive years. Carnival Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Carnival Corporation and Royal Caribbean Cruises, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Carnival Corporation 1 7 14 0 2.59
Royal Caribbean Cruises 0 3 15 0 2.83

Carnival Corporation currently has a consensus price target of $61.12, indicating a potential downside of 10.15%. Royal Caribbean Cruises has a consensus price target of $116.92, indicating a potential downside of 2.41%. Given Royal Caribbean Cruises’ stronger consensus rating and higher possible upside, analysts plainly believe Royal Caribbean Cruises is more favorable than Carnival Corporation.

Summary

Royal Caribbean Cruises beats Carnival Corporation on 10 of the 17 factors compared between the two stocks.

About Carnival Corporation

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.

About Royal Caribbean Cruises

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.

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