Royal Caribbean’s (RCL) strategy to hedge fuel prices helped restrain the spike in fuel costs. Moreover, with robust booking momentum, we believe that the company is well positioned to drive solid operating leverage in the long run.
The company is also restructuring its business to increase fuel efficiency. Slower industry capacity growth in 2012 and beyond will allow the company to reap returns considerably.
Moreover, the company is approaching its fourth quarter, which is the holiday season and expected to generate considerable revenues. Hence, we upgrade the stock from a Neutral to an Outperform rating.