Global cruise vacation company, Royal Caribbean Cruises Ltd. (NYSE:RCL) also underperformed, trading -11.51% lower in the period, despite continued strength in the company’s earnings growth. Concerns around the industry’s supply and demand dynamics, primarily in the Caribbean, have resulted in heightened sensitivity around pricing. The increase in fuel prices has also been an area of focus since it is a major component in the company’s cost structure. Meanwhile, RCL continues to reiterate that it is not experiencing any issues between the supply and demand relationship and that it has an expertise in managing volatile oil prices. The company also continues to generate significant free cash flow, with expectations of over $ 1.0 billion per year from 2019 forward. At current levels, RCL trades at a 27% discount to our estimate of private market value.
From John Rogers (Trades, Portfolio)' Ariel Fund second quarter 2018 shareholder letter.
