The historic visit by President Obama to Cuba has major ramifications not just for Cubans, but for American businesses as well.
For years, scores of U.S.-based companies have stated a deep desire to do business in Cuba, but have so far been unable to. That could finally be about to change.
At long last, relations between the U.S. and Cuba seem to be thawing. If Cuba finally pursues a more democratic system and liberalizes its economy, the following three stocks should benefit from restored U.S.-Cuba relations.
Royal Caribbean Cruises (NYSE: RCL)
In a March 21 research note, Nomura analyst Harry Curtis wrote that Royal Caribbean, along with others in the cruise line industry, could receive approval for Cuban voyages in a matter of days. If the Cuban government agrees, cruises to Cuba could commence as early as the back half of 2016.
According to Curtis, only relatively small vessels will initially be able to sail to Cuba, due to the physical limitations of the port of Havana. Still, that wouldn’t be a problem for Royal Caribbean, which could dedicate one of its Celebrity vessels to the cause.
The move would fit seamlessly with Royal Caribbean’s existing operations. It racked up more than $1 billion in profit last year – which set a company record – thanks in large part to booming demand in the Caribbean.
Adding Cuba to the possible list of Caribbean destinations would likely boost that segment even further.
American Airlines (NASDAQ: AAL)
In an age when airlines are scrambling to find any new revenue stream they can, opening up flights to Cuba would be an instant tailwind for major airlines like American.
Despite the undeniable benefit of low oil prices – one of the biggest cost components for carriers like American – the stock hasn’t performed well. Shares have lost 21% of their value over the past year.
Investors continue to be bearish on the stock, even though American Airlines racked up 50% profit growth in 2015. It earned $6.3 billion in net profit last year, which set a record for the company. But investors still don’t seem convinced, likely due to worries over whether the collapse in oil prices will be short-lived.
As a result, the U.S. loosening the embargo on Cuba could provide a much-needed boost to American Airlines’ bottom line.
Coca-Cola (NYSE: KO)
Coca-Cola is one of the most universally recognized and most valuable brands in the world. But Cuba is actually one of only two countries in the world where Coca-Cola isn’t allowed to market its products to consumers. North Korea is the other.
While Coca-Cola products are available in Cuba, being allowed to market them is an important distinction. Marketing is one of the strongest ways in which consumer products companies like Coca-Cola establish their brand legacy and connection with consumers.
And Coca-Cola has seen its sales flat-line in recent years, particularly in developed economies like North America. Having the ability to market itself in Cuba would allow the company to more effectively reach millions of potential new customers.
Coca-Cola management referred to 2015 as a year of transition. It is easy to see why the company thinks that way. In 2015, its total revenue and operating profits declined by 4% and 10%, respectively. In response, the company is hoping to expand in new markets to grow sales. A stronger presence in Cuba could only help in that regard.
Warren Buffett’s Big Secret
Warren Buffett didn’t become the world’s richest investor by accident. He did it by investing in a certain kind of stock. Few realize what separates this kind of stock from 99% of equities. But once you do, you’ll never invest the same way again. Discover Buffett’s big secret right here.