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Norwegian Cruise Line (NCLH) and Carnival (CCL) - Are These Travel Stocks Smart Investments Now?

The travel industry is well-positioned to grow thanks to rising demand and technological advancements. Therefore, let’s delve into the fundamentals of cruise companies Carnival Corporation (CCL) and Norwegian Cruise Line Holdings (NCLH) to assess their prospects. Read on…

The travel industry is poised for growth owing to increasing interest in authentic local and global adventures. Furthermore, adopting innovative technology is expected to bolster the industry's progress. For reasons discussed throughout this article, it could be wise to add cruise stock Carnival Corporation & plc (CCL) to one’s watchlist. However, we think Norwegian Cruise Line Holdings Ltd. (NCLH) is best avoided at the moment.

Before diving deeper into the fundamentals of these stocks, let’s discuss what’s happening in the industry.

Cruise ticket prices are on the rise due to increased demand following the post-pandemic period. This surge negatively impacts consumers, making cruise travel less affordable.

However, cruise vacations are experiencing a surge in popularity across diverse demographics due to their unique experiences, convenience, and the opportunity to explore multiple destinations and activities in one trip. This year, the revenue in the U.S. cruise market is expected to reach $12.50 billion and is projected to grow at a CAGR of 10.1% to reach $18.36 billion by 2027.

On top of it, increased consumer demand for diverse cruise experiences and ship design and technology advancements further contribute to the industry's expansion. The global cruise market is expected to grow at a CAGR of 11.5% from 2023 to 2030.

Considering these trends, let’s take a look at the fundamentals of the two Travel - Cruises stocks, starting with the one ranked lower from the investment point of view.

Stock #2: Norwegian Cruise Line Holdings Ltd. (NCLH)

NCLH and its subsidiaries operate as a cruise company in North America, Europe, the Asia-Pacific, and internationally. The company manages the Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises brands.

In terms of the trailing-12-month asset turnover ratio, NCLH’s 0.42x is 57% lower than the 0.98x industry average. Its 33.61% trailing-12-month gross profit margin is 5.3% lower than the 35.48% industry average. Likewise, the stock’s 6.50% trailing-12-month EBIT margin is 13.7% lower than the 7.53% industry average.

NCLH’s revenues for the fiscal third quarter ended September 30, 2023, came in at $2.54 billion. The company’s adjusted net income and adjusted EPS came in at $387.95 million and $0.76, respectively. In addition, its cash and cash equivalents came in at $681.56 million, compared to $946.99 million as of December 31, 2022.

For the quarter ending December 31, 2023, NCLH’s EPS is expected to remain negative. Over the past six months, the stock has declined 8.3% to close the last trading session at $16.42.

NCLH’s weak fundamentals are reflected in its POWR Ratings. It has an overall rating of D, equating to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It is ranked last in the Travel - Cruises industry. It has a D grade for Stability, Sentiment, and Quality. Click here to see NCLH’s Growth, Value, and Momentum ratings.

Stock #1: Carnival Corporation & plc (CCL)

CCL engages in the provision of leisure travel services internationally. The company operates through four segments: NAA Cruise Operations, Europe Cruise Operations, Cruise Support, and Tour and Other.

On January 30, 2024, CCL announced Celebration Key, its exclusive destination on Grand Bahama, featuring five distinct areas called portals offering a variety of unique experiences, including family-friendly activities, adult relaxation, luxurious private club amenities, retail shopping, and dining venues. The new destination is featured on over 500 cruise itineraries and will open in July 2025.

In terms of the trailing-12-month gross profit margin, CCL’s 49.56% is 39.67% higher than the 35.48% industry average. Its 15.21% trailing-12-month Capex/Sales is 400.2% higher than the 3.04% industry average. However, the stock’s 2.97% trailing-12-month Return on Total Capital is 51.1% lower than the 6.08% industry average.

For the third quarter, which ended August 31, 2023, CCL revenues increased 59.2% year-over-year to $6.85 billion. The company’s net income stood at $1.07 billion, compared to a net loss of $770 million in the year-ago quarter. Moreover, its EPS came in at $0.79, compared to the prior-year quarter loss per share of $0.65.

For the quarter ending February 29, 2024, CCL’s revenue is expected to increase 21.9% year-over-year to $5.40 billion, while its EPS for the same quarter is expected to remain negative. It surpassed the Street EPS estimates in all of the trailing four quarters. Over the past nine months, the stock has gained 43.8% to close the last trading session at $15.31.

CCL’s uncertain outlook justifies its overall rating of C, which translates to Neutral in our proprietary POWR Ratings system. It also has a C grade for Momentum, Sentiment, and Quality.

It is ranked #2 out of 4 stocks in the Travel - Cruises industry. In total, we rate CCL on eight different levels. Beyond what we stated above, we also have given CCL grades for Growth, Value, and Stability. Get all the CCL’s ratings here.

What To Do Next?

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10 Stocks to SELL NOW! >

CCL shares were trading at $15.40 per share on Monday morning, up $0.09 (+0.59%). Year-to-date, CCL has declined -16.94%, versus a 5.44% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.


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