After a gloomy performance during the pandemic, many cruise stocks have delivered gains for long-term investors. The cruise industry is poised to benefit from a multiyear boom, however, as Grand View Research projects that it will maintain a compound annual growth rate of 11.5% from now until 2030.
While growth was easy to find as the industry recovered from the pandemic, some cruise stocks have posted double-digit returns year to date. Many of these same companies have rising revenue and profit margins. But despite positive sentiment, many cruise stocks still have not returned to their pre-pandemic prices.
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Cruise Stock Risks to Keep in Mind
With the pandemic largely in the rear-view mirror, the travel sector carries some risks. Some stocks are riskier than others, but John Engle, president of Almington Capital, says some risks specifically apply to cruise stocks.
“The biggest risk for cruise stocks is sustainable profitability,” says Engle. “Many cruise operators are carrying an awful lot of debt, and it is not clear whether they will be able to service it over the long run. Thin profit margins and high debt should always be a cause for concern for investors looking at cyclical industries. Even a mild recession could be enough to devastate cruise operators’ bottom lines.”
An economic slowdown may be on the way. The latest U.S. jobs report, released earlier this month, revealed lower job growth than expected in July and a rising unemployment rate. Furthermore, some of the job growth numbers in previous months have been revised downward, meaning they were lower than the U.S. Labor Department initially reported.
Cruise stocks can continue their run as long as travel demand stays strong. However, any slowdowns can hurt cruise companies that carry significant debt. Cruise stock investors should carefully monitor travel demand to gauge the risk of their investments.
Investors seeking exposure to heightened travel demand may want to consider these seven top cruise stocks:
| Stock | Year-to-date return as of Aug. 5 |
| Carnival Corp. (ticker: CCL) | -22.3% |
| Royal Caribbean Cruises Ltd. (RCL) | 7.9% |
| Norwegian Cruise Line Holdings Ltd. (NCLH) | -23.5% |
| Lindblad Expeditions Holdings Inc. (LIND) | -35.5% |
| Agilysys Inc. (AGYS) | 19.6% |
| OneSpaWorld Holdings Ltd. (OSW) | 7.2% |
| World Kinect Corp. (WKC) | 15.1% |
Carnival Corp. (CCL)
Carnival’s revenue and net income have continued to trend upward ever since the demand for travel returned. The company’s second-quarter results revealed that sales increased by 17.7% year over year as total customer deposits reached a record $8.3 billion. That’s more than $1.1 billion higher than the previous record.
Carnival also reported a record $560 million in operating income. That’s nearly five times 2023 levels, and it accompanied a record $5.8 billion in second-quarter revenue.
The company raised its guidance for fiscal 2024, and its successes in 2024 should carry over into 2025, which can benefit long-term investors.
“We are very pleased with the continued acceleration of demand for 2025 and beyond, which builds upon the fantastic achievements in 2024 thus far,” CEO Josh Weinstein said in Carnival’s second-quarter earnings news release.
Royal Caribbean Cruises Ltd. (RCL)
Royal Caribbean Cruises has returned to profitability with net profit margins above 20%. The cruise holding company raised full-year guidance after reporting solid results in the second quarter. Net income came in at $854 million compared to $459 million in the same quarter last year. That’s an 86% year-over-year increase.
The total customer deposit balance reached $6.2 billion at the end of the second quarter. Furthermore, Royal Caribbean Cruises recently reinstated its dividend. Investors will receive a quarterly dividend of 40 cents per share. Heightened adjusted EPS guidance of $11.35 to $11.45 per share suggests a 68% year-over-year improvement.
Commentary from company President and CEO Jason Liberty suggests that business is booming.
“We have seen strength for all key products and are already taking more bookings for 2025 sailings than 2024,” he states.
Norwegian Cruise Line Holdings Ltd. (NCLH)
Norwegian Cruise Line Holdings is yet another cruise operator raising its guidance, projecting full-year adjusted EBITDA of $2.35 billion, up from $2.3 billion. Norwegian also raised its full-year adjusted net income guidance from $730 million to $790 million, marking a $60 million increase.
The cruise company reported second-quarter revenue of $2.4 billion, which was 8% higher than the same quarter last year. GAAP net income came in at $163.4 million, which was a 90% year-over-year improvement.
Norwegian is on pace to achieve a double-digit adjusted return on invested capital by the end of the year. Adjusted EPS is expected to grow by approximately 120% compared to 2023.
Mark A. Kempa, executive vice president and chief financial officer, mentioned that the company has strong momentum and sees “robust demand” as it enters the second half of 2024.
Lindblad Expeditions Holdings Inc. (LIND)
Lindblad Expeditions is a smaller cruise stock with a $425 million market capitalization. The company reported 7% year-over-year sales growth in the first quarter. Demand continues to grow, as bookings for 2024 are 4% ahead of bookings for 2023. Available guest nights increased by 3% year over year, allowing Lindblad to accommodate more visitors.
The company’s cash position increased from $187.3 million on Dec. 31 to $224.2 million as of March 31. That’s a 19.7% increase. Lindblad is also in the middle of a stock buyback program. As of April 29, the company had used $23 million of the $35 million it authorized for share repurchases.
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Agilysys Inc. (AGYS)
Agilysys provides software for the hospitality industry, giving it some exposure to cruise lines. The company serves various sectors, such as hotels, resorts, stadiums and higher education.
Shares are off to a good start year to date, rising about 20% as of Aug. 5, and have more than quadrupled over the past five years.
The company delivered 13.3% year-over-year revenue growth in the first quarter of fiscal 2025. That marks its 10th consecutive record-revenue quarter. Subscription revenue, which now makes up more than half of total recurring revenue, increased by 32% year over year. As subscription revenue consists of a larger portion of the total business, Agilysys’ revenue growth should accelerate. Net income attributable to shareholders soared from $1.1 million to $14.1 million year over year.
Agilysys anticipates generating $275 million to $280 million in revenue throughout fiscal 2025. Adjustable EBITDA is expected to be 16% of revenue.
OneSpaWorld Holdings Ltd. (OSW)
OneSpaWorld Holdings provides spas, wellness and treatments on cruises and on land. Shares are up by 7.2% year to date and come with a dividend yield just above 1%. Revenue increased by 12% year over year in the second quarter, prompting the company to raise its fiscal year guidance.
The company operates health and wellness centers on 197 ships, compared to 183 ships in the same quarter last year. Net income reached $15.8 million, compared to a $3.2 million net loss in Q2 2023. OneSpaWorld Holdings anticipates 2024 revenue will range from $870 million to $890 million. The midpoint implies 10.8% year-over-year revenue growth compared to the $794 million generated in 2023.
“We remain confident in our ability to deliver strong operating and financial performance, both near term and long term, and increase value to our shareholders,” CEO Leonard Fluxman said in OneSpaWorld’s second-quarter earnings release.
World Kinect Corp. (WKC)
World Kinect Corp., formerly known as World Fuel Services Corp., is an energy, commodities and services company. It has delivered over 18 billion gallons of fuel to more than 150,000 customers, including cruise lines. World Kinect’s revenue was flat in the second quarter, but shares are up by 15% year to date. Diluted earnings per share soared by 277% year over year to reach $1.81.
Chairman and CEO Michael Kasbar noted that the company is facing short-term headwinds in its Land segment, but its Aviation business continues to soar. Gross profits for the aviation segment are up by 3% year over year and make up almost half of the the company’s total gross profits. CFO Ira Birns said in the company’s earnings release that World Kinect is focused on expense control and working capital management.
Should You Get On Board With Cruise Stocks?
Many cruise stocks have delivered rising revenue and profit margins and have raised their guidance for the rest of the year. Significant travel growth has helped cruise lines hit revenue records and achieve profitability.
However, cruise stocks have their risks. An economic slowdown can hamper their business model and make it more difficult to achieve double-digit year-over-year revenue growth.
Investors should also monitor how cruise lines cover their long-term debt and track whether the demand for travel remains elevated.
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7 Best Cruise Stocks to Buy Now originally appeared on usnews.com
Update 08/06/24: This story was previously published at an earlier date and has been updated with new information.
