Cruise Lines Sailing at Different Speeds

Carnival continues to see drama, Norwegian Cruise Line delivers strong top-line growth, and Royal Caribbean falls somewhere in the middle.

Mar 22, 2014 at 10:00AM


Source: ( 

The Carnival (NYSE:CCL) Triumph in February 2013 was a five-day disaster, all started by an engine fire. Passengers endured no working toilets, no air-conditioning, and a limited supply of food all while trapped at sea. After this unfortunate event, Carnival invested $115 million in improvements for fire safety and added backup power.

On June 13, 2013, a booked Carnival Triumph was set to sail. But it's what took place on June 12, 2013 that's interesting.

Safe or not?
According to testimony before the U.S. Senate Committee on Commerce, Science, and Transportation, the U.S. Coast Guard detained the Carnival Triumph on or around June 12, 2013. This related to a failed inspection, including serious deficiencies related to fire detection and lifeboat drills. There were 28 other deficiencies as well, including problems with sprinkler systems.

What's interesting is that around this same time, Carnival posted a video about the improvements of the Carnival Triumph, ensuring the safety of passengers. 

Additionally Senator Jay Rockefeller felt as though Carnival CEO Gerald Cahill's opening statement of approximately one minute was devoid of substance.

Due to past events, the Carnival Triumph will now be subject to quarterly examination for three years.

While people will offer all kinds of opinions on the competence -- or lack thereof -- of Carnival's upper management, the fact is that the company has seen numerous incidents over the past several years. Therefore, it might not be the best investment option in its peer group.

Investing in safety and results
President and CEO Gerald Cahill has been in charge since 2007.

Royal Caribbean (NYSE:RCL) President and CEO Adam Goldstein has been running his company since 2007 as well.

If it all starts at the top and you're looking to invest in the leadership that offers the most potential, then first consider past results. The chart below compares total investor returns (stock appreciation plus dividends) over the past five years:

CCL Total Return Price Chart

Source: Carnival total return price data by YCharts

Based on this chart, Royal Caribbean has stronger leadership and is more likely to reward its investors in the future.

Norwegian Cruise Line Holdings (NASDAQ:NCLH)went public in January 2013. Over the past year, the stock has appreciated 9.5%, whereas Royal Caribbean and Carnival have seen stock appreciations of 59.7% and 16.5%, respectively, over the same time frame.

Over the past year, Carnival has seen its revenue increase just 0.8%, while Royal Caribbean and Norwegian Cruise Line have seen revenue increases of 2.5% and 12.3%, respectively.

If you're only looking at top-line growth, then Norwegian Cruise Line would be the most appealing. While this might be the case, keep in mind that Norwegian Cruise Line is trading at 67 times earnings, whereas Royal Caribbean and Carnival are trading at just 25 and 29 times earnings, respectively.

Additionally, Norwegian Cruise Line doesn't offer any yield. Currently, Royal Caribbean offers a dividend yield of 2%, and Carnival offers a dividend yield of 2.6%.

Carnival is a strong brand name with international recognition. Therefore, a turnaround is possible. However, at the moment, leadership seems to be lacking. It's one incident and excuse after another. Norwegian Cruise Line is growing rapidly, but it's also very expensive, which makes expectations high.

Royal Caribbean might not be growing as fast as Norwegian Cruise Line, but it's offering steady top-line growth and trading at a much better valuation. Add strong leadership and a somewhat generous yield, and it should be the most appealing cruise-line investment of the group. As always,Foolish investors should do their own research prior to making any investment decisions.

6 stock picks for ultimate growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.


Dan Moskowitz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information