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Why Carnival Corporation and Norwegian Cruise Line Stocks Popped Today

By Rich Smith – Aug 5, 2021 at 4:09PM

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At least one of the three big cruise lines see positive cash flow arriving in six months.

What happened

As the coronavirus delta variant runs amok, the United States recorded more than 92,700 new cases of Covid-19 yesterday. Yet cruise line stocks today are ... up?  

Yes, believe it or not. As the trading day winds to a close here at 3:45 p.m. EDT, shares of Carnival Corporation (CCL 1.85%) stock are up 6.9% over yesterday's close, and rival Norwegian Cruise Line Holdings (NCLH -0.79%) is close behind with a 6.3% gain.

Investors in both these cruise line stocks, however, may owe their good fortune to a third: Royal Caribbean (RCL).

Three cruise liner ships lined up abreast in port.

Image source: Getty Images.

So what

In case you haven't heard, Royal Caribbean reported its fiscal Q2 earnings results yesterday. The news wasn't great -- Royal Caribbean lost $5.29 per share in the quarter. It also predicted another loss in Q3 and a loss for the year as a whole.

But here's the thing: In the company's after-earnings conference call with analysts, Royal Caribbean CFO Jason Liberty pointed out that 29 of Royal Caribbean's 68 ships are back in the water, with seven more resuming cruise operations by the end of this month. By the end of this year, Royal Caribbean expects to have 85% of its fleet operational again -- and predicted the company will be cash flow positive again "in about six months," reports

Now what

Caveats abound. For one thing, what's true for Royal Caribbean may not be true for Carnival or Norwegian Cruise. Also, Liberty didn't say precisely how much cash flow Royal Caribbean will produce and didn't promise to be free cash flow positive.

As a matter of fact, with Royal Caribbean expecting to spend $900 million on capital investment over the remainder of this year, I'd say it's pretty unlikely that the company will be free cash flow positive. Still, it's baby steps.  

On an operational basis, at least, Royal Caribbean will cease burning cash by early 2022 at the latest. For now, that seems like plenty of good news to encourage investors in Royal Caribbean stock -- and in Carnival and Norwegian Cruise Line Holdings, too.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Carnival & Plc Stock Quote
Carnival & Plc
$9.93 (1.85%) $0.18
Royal Caribbean Stock Quote
Royal Caribbean
$59.93 (%)
Norwegian Cruise Line Holdings Stock Quote
Norwegian Cruise Line Holdings
$16.44 (-0.79%) $0.13

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