Article Excerpt:
TWST: Can you give us an idea of what you're covering in the leisure space?Ms. Osur: We look at several different industries within the leisure group. First, we cover the cruise operators, Carnival Corp. Royal Caribbean (RCL). Second, we cover the videogame publishing group, which includes Activision (ATVI), Electronic Arts (ERTS), THQ (THQI) and Take- Two (TTWO). And then rounding out the consumer discretionary group, we also cover boating company Brunswick Corp. (BC).
TWST: Let's start with the cruise lines. What's gone on there so far
this year from a business perspective?
Ms. Osur: From a business perspective, the cruise lines are
exceptionally well positioned this year. We've had rising demand for
cruising, and yields have been rising. Business trends look incredibly
strong, and we see continued potential from a number of different
factors, including better pricing that the companies are already
experiencing and have been since 2004. Better pricing comes from a
return to historical pricing levels, as well as having better product in
the market now. On the yield side, we also see potential in the future
for lower travel agent commissions and bringing down the percentage of
cruises that are booked through travel agents. In general, half of
demand is coming from return cruisers and the other half is coming from
first-time cruisers. So operators are expanding their markets. On the
cost side, the business environment has been more challenging. We've
seen fuel prices come up significantly year over year. Right now, we're
forecasting around a 20% increase year over year in the average price of
fuel for both companies. So fuel certainly has been a problem on the
cost side. On the other hand, operators are making moves to control the
cost structure and limit the impact. Overall, we're seeing strong
earnings growth from pricing improvements, keeping costs in control, and
then also from building out new ships.
Tickers included in this excerpt: ATVI, BC, CCL, ERTS, MSFT, NTDOY, RCL, SNE, THQI, TTWO
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