Is It Time To Buy Carnival And Other Cruise Line Stocks?

Cruise line stocks kicked off the new trading week in bullish fashion. Shares of Carnival Corp. (NYSE: CCL), Royal Caribbean (NYSE: RCL), and Norwegian Cruise Line (NYSE: NCLH) rose 7%, 4%, and 8%, respectively.

Bullish news out of Norwegian help lift all ships, and we'll get to that development shortly. In the meantime, the same cruise line stocks that trounced the market last year have been far less impressive in 2024. This could be a great time to warm up to Carnival and its fellow cruise line operators, and Monday's jump could be just the beginning. Let's take a closer look.

The future keeps getting better

Norwegian hosted its 2024 Investor Day on Monday. The country's third-largest cruise line disappointed investors with mixed quarterly results three weeks ago. It did its best to win market sentiment back this time.

Norwegian boosted its guidance for all of 2024 on Monday. It had already lifted its full-year outlook for the bottom line in its previous financial update on May 1, lifting its adjusted earnings-per-share guidance from $1.23 to $1.32. Now it's eyeing a profit of $1.42 a share.

It's not alone. If Norwegian's rosier outlook seems familiar it's because larger rival Royal Caribbean did the same thing back in February. It offered raised guidance, only to boost it again just three weeks later on the strength of record bookings and improving fundamentals. Carnival hasn't scratched this three-week itch just yet, but it's prognosis also continues to get better.

All three cruise line stocks are cheaper than you may think

Only Royal Caribbean is trading higher this year. Even after Monday's 7% to 8% jumps, Carnival and Norwegian are still trading at double-digit percentage declines in 2024.

It's easy to see why Royal Caribbean is leading the way so far this year. It's growing faster, has the lower trailing earnings multiple, and is operating at the highest margins. However, analysts see Carnival and Norwegian closing the gap in the coming quarters.

Data source: Schwab.

The valuations get even more attractive when you take a longer look. All three stocks are trading for less than 12 times what analysts see them earnings in 2025. Keep coasting and the sun gets even brighter. Part of Norwegian's 2024 Investor Day had it introducing new goal for 2026 including generating an adjusted profit of $2.45 a share. If it does get there in two years, it means you can buy Norwegian today for less than seven times what it will earn on an adjusted basis in 2026.

Momentum is a tailwind pushing cruise line stocks into kinder waters. Carnival, Royal Caribbean, and Norwegian announced record advance bookings and customer deposits in their latest financial updates. The pandemic was brutal for the industry, but it has come back even stronger. Customer demand is rising, and all of the fleets are making sure that they are better positioned to optimize the opportunity of passengers willing to spend more on a floating vacation.

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Rick Munarriz has positions in Norwegian Cruise Line and Royal Caribbean Cruises. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.