Over the past 12 months, shares in cruise line operator Norwegian Cruise Line (NCLH -1.88%) have fallen by nearly 19%. As has been the case with other cruise ship stocks, concerns about the impact of Mideast geopolitical tensions on fuel prices and passenger demand played a big part in these declines.
Later this week, Norwegian Cruise Line reports its latest quarterly results. However, whether the results are strong or weak, I believe there is a much stronger long-term opportunity in this sector than Norwegian.
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Norwegian Cruise Line reports results for the June quarter pre-market on July 30. Sell-side estimates call for earnings of $0.39 per share, or around a 23.5% decrease from the prior year's quarter. Already aware of forecast declines, investors likely will pay greater attention to guidance updates.
NYSE: NCLH
Key Data Points
Last quarter, again due to the Mideast conflict, Norwegian's management walked back its full-year 2026 forecast, anticipating earnings between $1.45 and $1.79 per share, a far cry from prior guidance, which called for full-year earnings as much as $2.38 per share. Still, even a slight adjustment, such as tightening the earnings range, could have a strong positive impact on sentiment toward the stock.
Although there could be a post-earnings rally, if the latest numbers prove better than anticipated, I would still skip Norwegian shares.
Trading for around 11 times forward earnings, it trades at a steep discount to competitor Royal Caribbean Cruises (RCL -1.57%), which trades for 17 times forward earnings. However, you can also pick up Carnival (CCL -1.49%) at a similar forward multiple as Norwegian. Not only that, Carnival is far less levered and currently pays a dividend, with a forward yield of around 1.7%.
Simply put, Carnival Cruise Lines stock represents a stronger risk/reward proposition and hence should be considered a contender for those bullish on the cruise line industry in the long term.
