Does This Management Change Make Carnival More Attractive?

It was recently announced that Jan Swartz is taking over as President of Princess Cruises on December 1, 2013. If you have been reading the headlines, then you're already aware of this event. However, do you know anything about her, including what she has planned? You will find this information below. We'll also take a look to see if Carnival (NYSE: CCL  )  now has better investment potential than Royal Caribbean (NYSE: RCL  ) and Norwegian Cruise Line (NASDAQ: NCLH  ) .

Jan Swartz
Prior to her promotion, Jan Swartz had been Senior Vice President of Customer Service and Sales for Princess and Cunard (since 2004). From 2001-2004, she was Vice President of Strategy and Business Development. Before she embarked on her Carnival adventure, she worked at Bain & Company for five years, guiding consumer and service companies with their growth strategies.

This is impressive, but it has also been reported that she acted as CEO of MXG Media. I have gone to great lengths to find out more information about this company. It is, or was, an interactive entertainment company. All I can find are defunct websites and an archaic Facebook page. This isn't a negative for Jan Swartz and her potential, but it should be noted.

Looking ahead, Jan Swartz sees big potential for Carnival. This is obvious, as anyone stepping into such a position would make this statement. However, she does have a plan, which is focused on attracting new customers with shorter cruises. Based on consumer feedback, many travelers like to go to Las Vegas or New York for a long weekend. By offering shorter cruises, many travelers are likely to opt for a more unique experience. This initiative will be North America-focused.

Jan Swartz also wants to build on globalization by pushing and designing initiatives that other companies don't offer. Swartz (I'm only going to use her last name from this point forward since there are no other Swartz's mentioned) also plans on taking advantage of all the brainpower within the Princess Cruises operation by listening to and considering creative ideas for innovation and marketing.

It sounds like Swartz knows what she's doing. Her Master of Business Administration from Harvard Business School is a bonus that inspires confidence.

So ... despite Carnival's horrific safety track record, at least there's a little more hope surrounding the company at this point in time. Is it enough hope for investors to consider Carnival over Royal Caribbean and/or Norwegian Cruise Line?

Royal Caribbean beats expectations
Royal Caribbean's third quarter saw better-than-expected results, primarily thanks to strong demand in Europe and Asia as well as on-board revenue. Looking ahead, Royal Caribbean expects constant-currency net yield to increase 3%, fuel costs to be $3 million lower than previously expected (energy-saving initiatives/unscheduled dry-dock of Millennium), and earnings per share of $2.30-$2.35.

Norwegian Cruise Line exudes confidence
Norwegian Cruise Line has managed to execute in a challenging macroeconomic environment. This is mostly due to improved ticket pricing and onboard spending. Norwegian Cruise Line has also seen bottom-line improvements thanks to effective initiatives. For fiscal year 2013, Norwegian Cruise Lines expects net yield of 4%-4.5% on a constant-currency basis.

Comparing cruise lines
This is an interesting comparison. First take a look at top-line performance comparisons over the past five years:

CCL Revenue (TTM) Chart

CCL Revenue (TTM) data by YCharts

Carnival lags its peers on the top line. If you look closely at that chart, you will see that there's no recent momentum for Carnival. Now take a look at some key metric comparisons:

 

Forward P/E

Profit Margin

ROE

Dividend Yield

Debt-to-Equity Ratio

Carnival

23

7.19%

4.56%

2.80%

0.41

Royal Caribbean

14

0.93%

0.85%

2.40%

0.91

Norwegian Cruise Line

14

2.70%

2.95%

N/A

1.21

Carnival isn't appealing on a valuation basis, especially since it lags its peers on the top line. That said, Carnival is the best at turning revenue and investor dollars into profits, it offers the highest yield, and it has demonstrated the best debt management.

The bottom line
If Carnival could find a way to drive its top line, it would likely be the best investment of the three. However, that's only hypothetical as of right now. In addition to lagging its peers on the top line, Carnival has a lot of negativity surrounding it due to recent incidents. This has led to a loss of confidence from travelers and investors.

Royal Caribbean offers solid top-line growth and a generous yield. The problem with Royal Caribbean is that it's weak on the bottom line. Norwegian Cruise Line is strong on the top line yet it's also somewhat weak on the bottom line and it doesn't offer any yield. On the other hand, it has demonstrated pricing power and it offered solid guidance, which investors love. 

All three companies offer potential, but none of them are solid across the board. 

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