Which cruise line is in financial trouble?
With lockdowns and travel restrictions in place, cruise companies had no ability to operate and generate cash flow, leading to aggressive debt and equity financing. As a result, Norwegian Cruise Line is going to have a difficult time mounting a meaningful post-pandemic recovery.
Obviously, with the existing $3.1 billion, the company can meet its principal payments on debt maturing in 2022. All that implies the company's debt is manageable right now. We can also say that Norwegian Cruise Line's debt is a direct result of the pandemic.
Last week, the most-awarded luxury cruise line in the industry, Crystal Cruises, unceremoniously shuttered its doors, with not a word to consumers nor travel agents.
Perhaps the biggest problem for Carnival is its massive debt load. It tripled its debt during the pandemic, significantly more than its peers. Moreover, with the lack of revenue, it burns $2 billion per quarter. Its debt is roughly 2.2 times its equity, which is more than 410% higher than its 10-year median.
1. Carnival Cruise Line (CCL) Carnival, the world's largest cruise line operator, cruises to destinations all over the world. The cruise line's Carnival Pride began sailing again in September 2021 — the first ship to set sail from the Baltimore cruise terminal in 18 months.
In addition, the Company has also removed all calls to ports in Russia from its itineraries in 2023. The Company reached a significant financial inflection point in March with Operating Cash Flow turning slightly positive. The Company also expects Operating Cash Flow to be positive for the second quarter of 2022.
Carnival is the weakest of the three big cruise lines because it piled on debt buying new ships when times were good. Its size forced it to buy more debt to stay alive in 2020. It ended fiscal 2022 with almost $30 billion of long-term debt.
Based on the latest financial disclosure, Royal Caribbean Cruises has a Probability Of Bankruptcy of 55%. This is 32.88% higher than that of the Consumer Cyclical sector and significantly higher than that of the Travel Services industry.
The company has suspended all payments to financial creditors and in a statement said that the remaining available cash will be used to maintain critical services for its operations, while negotiating a restructuring. The company's outstanding financial indebtedness was US $3.37 billion as of July 31st, 2020.
Bahamian authorities arrested two cruise ships from the Hong Kong-based Crystal Cruises, the Crystal Symphony and the Crystal Serenity, after a U.S. court ordered their seizure last month over millions of dollars in unpaid fuel bills, according to cruise industry publications.
Can Norwegian Cruise Line survive?
Norwegian Cruise Line has improved its financial position even though it has taken on more than $12 billion worth of debt to survive, including an additional $2.1 billion in debt transactions conducted just this month.
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In addition, more than 75 percent of oceangoing capacity is already back in service—and nearly 100 percent is expected back in operation by August 2022. Best of all, travel advisors and passengers will likely see a full cruise industry recovery in 2023.
Large Ship Line #1: Disney Cruise Line.
Royal Caribbean, Carnival Cruise Lines Hit a Pandemic Comeback Milestone. The cruise industry has bounced back. The Royal Caribbean ship Rhapsody of the Seas has returned to service, offering seven-night Mediterranean and Greek Isles sailings from Rome.
The Carnival Dream cruise ship docked at Port B in Key West, Florida. Cruise stocks were tumbling to their lowest point since 2020 on Thursday as fears intensified over rising inflation and a potential recession. Carnival (ticker: CCL ) was down 9.5% to $8.91, and was on track for its lowest close since April 2020.
People should avoid cruise travel regardless of their vaccination status, the CDC says. The agency says it will continue to provide guidance to the cruise ship industry in order for cruise lines to operate in a way that will provide "safer and healthier" environments for crews, passengers and communities.
The Bottom Line
While both CCL and NCLH are expected to benefit, CCL looks more attractive at current levels because of its superior financials, lower valuation, and better growth prospects.
Norwegian Cruise Line Holdings Ltd.
may be overvalued. Its Value Score of F indicates it would be a bad pick for value investors. The financial health and growth prospects of NCLH, demonstrate its potential to underperform the market. It currently has a Growth Score of D.
Norwegian was forced to incur billions of dollars of debt during the early stages of the pandemic, when its ships were unable to sail due to coronavirus-related safety measures.
Is Norwegian Cruise Line stock a buy?
Norwegian Cruise Line has received a consensus rating of Hold. The company's average rating score is 2.46, and is based on 6 buy ratings, 7 hold ratings, and no sell ratings.
With Full Fleet Returned, Now a Focus on Occupancy
In fact, this quarter the company aims to sail at 65% capacity, with full occupancy coming in 2023. “I think it's going to be in the first half of 2023,” said Chief Financial Officer Mark Kempa when asked about reaching historical occupancy.
