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3 Industries to Benefit From New Cuba Relationship

As President Obama enters the last few months of his presidency, one of his most impactful diplomatic decisions is finally starting to take shape. After five decades of division, relations between the United States and Cuba are beginning to normalize again.  

Back in March, the Obama family visited Cuba, marking the first time a sitting U.S. president has set foot in the communist nation since 1959. Just a little over a month later, it appears that visits from average American citizens are becoming more common.

Tourism Pipeline

On Monday morning, Carnival Cruise Line (CCL) and its Fathom Adonia luxury ship arrived at Havana Harbor. Carnival’s voyage was the first trip from Miami to Cuba in over 50 years, and the U.S. cruise business to Cuba is officially back.

“It was a very special point of view and a very special moment – to feel the emotions of everyone on the ship and then feel the emotions of the people on shore too,” said Carnival CEO Arnold Donald, who stood at the bow of the ship as it pulled into Havana.

Carnival’s Fathom Adonia line departs from Miami and circumnavigates Cuba on its week-long route. The trip is a “people-to-people” trip, meaning that passengers are encouraged to interact with local Cubans while at port.

(Also Read: Why Carnival (CCL) Could Be an Impressive Growth Stock)

Besides Carnival, there are several other travel-related stocks that should benefit. One example would be American Airlines (AAL), the domestic carrier with the most charter flights to Cuba and a major hub in Miami. American is in the process of launching a charter service from Los Angeles, and the company says its ready to offer commercial flights once they are allowed.

Another travel stock that could benefit from increased business in Cuba is Panama-based airliner Copa Holdings (CPA). Copa is already the largest foreign airline in Cuba, offering half a dozen flights to and from the island every day.

Building Boom

Another logical result of increased economic activity in Cuba could be a construction boom. One U.S. company that could cash in is Vulcan Materials (VMC), the largest domestic producer of construction materials. Vulcan operates a large quarry on the Yucatan Peninsula in Mexico, potentially a fantastic location for exports to Cuba.

Vulcan just released its Q1 earnings, reporting EPS of 26 cents, which crushed the Zacks Consensus Estimate of 6 cents. The company’s quarterly revenues of $754.7 million also smashed our estimate of $710 million. As a result, Vulcan bumped up its 2016 guidance, driven by improving profits per ton in its Aggregates segment, as well as higher earnings in the Non-Aggregates segments.

If Vulcan can beat the rest of the industry to Cuba, it should be able to continue its solid performance.

Telecom Blitz

As Cuba begins to develop, the major telecom giants are also Cuba bound. Verizon Partner Solutions, a subsidiary of Verizon Communications (VZ), recently reached an agreement with Cuba’s state-run telecom company Empresa de Telecomunicaciones de Cuba (ETECSA) to offer mobile roaming services between the United States and Cuba.

Reports also indicate that AT&T (T) is looking for an agreement with the ETECSA. Apparently, negotiations between the two entities are underway, while AT&T is also pushing the FCC to drop its existing nondiscrimination rules on the U.S.-Cuba route. AT&T believes that dropping these rules will allow for cheaper communication between the two countries.

On the TV side of things, streaming giant Netflix (NFLX) entered into the Cuban market last year. While only 5% of Cubans had unfiltered access to the internet when Netflix began service in the country, the company expressed confidence that more citizens would subscribe “as Internet access improves and credit and debit cards become more widely available.”

Bottom Line

Simply put, the new relationship between the U.S. and Cuba should be good business for a lot of publicly-traded companies. Hopefully for the U.S.-based businesses, Cuba will open its doors to tourists, while also modernizing its infrastructure and technology, allowing for more U.S. economic impact.

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COPA HLDGS SA-A (CPA): Free Stock Analysis Report
 
NETFLIX INC (NFLX): Free Stock Analysis Report
 
AT&T INC (T): Free Stock Analysis Report
 
VERIZON COMM (VZ): Free Stock Analysis Report
 
VULCAN MATLS CO (VMC): Free Stock Analysis Report
 
CARNIVAL CORP (CCL): Free Stock Analysis Report
 
AMER AIRLINES (AAL): Free Stock Analysis Report
 
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