Despite easing travel restrictions, cruise companies are still in troubled waters due to the rising fuel costs and the slowing economy. With the Consumer Price Index (CPI) data coming in hotter-than-expected in August, the Fed is expected to continue its interest rate hikes, posing challenges to high-debt cruise ship operators.

Moreover, fears of an impending recession have dampened cruise line sales as consumers cut back on their discretionary spending. With increasing debts and dampened financials, top cruise companies are now set to roll back their Covid-19 testing policies and allow passengers to board most voyages without the vaccine requirements.

Amid this backdrop, it could be wise to avoid cruise stocks Carnival Corporation & plc (CCL) and Norwegian Cruise Line Holdings Ltd. (NCLH), given their poor fundamentals.

Carnival Corporation & plc (CCL)

CCL operates as a leisure travel company in the United States and internationally. Its global cruise line brands portfolio includes Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises (Australia), Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK), and Cunard. The company also provides port destinations and other services, as well as owns and operates hotels, lodges, glass-domed railcars, and motor coaches.

Last month, CCL’s Princess cruises canceled 11 sailings aboard the Diamond Princess due to staffing issues that have been consistent across the cruise industry this year. According to the company, the brand faced “labor challenges” as travelers flocked back to cruises, and its ships resumed sailing with increased occupancy.

For the second quarter ended May 31, 2022, CCL’s operating loss came in at $1.47 billion. The company reported a net loss of $1.83 billion, while its loss per share amounted to $1.61.

CCL’s EPS is expected to come in at a negative $0.29 in the quarter ending November 2022. The stock has declined 54.2% over the past year and 46.4% year-to-date to close the last trading session at $10.42.

CCL’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

CCL also has an F grade for Stability and a D for Value, Quality, and Sentiment. Within the F-rated Travel – Cruises industry, it is ranked #2 of 4 stocks.

Click here to see additional POWR Ratings for Growth and Momentum for CCL.

Norwegian Cruise Line Holdings Ltd. (NCLH)

NCLH operates as a cruise company in North America, Europe, the Asia-Pacific, and internationally. It offers itineraries ranging from three days to a 180-days calling on various locations, including Scandinavia, Russia, the Greek Isles, Alaska, Canada, and Hawaii. Its brands include the Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises.

In the second quarter ended June 30, 2022, NCLH’s operating loss came in at $396.80 million. The company reported a net loss of $509.32 million, while its loss per share amounted to $1.22. Its cash and cash equivalents balance stood at $1.90 billion, down 19.5% year-over-year for the six months ended June 30.

Analysts expect NCLH’s loss per share to come in at $0.65 in the current quarter ending September 2022 and $4.35 in the ongoing fiscal year.

The stock has declined 40.1% over the past year to close the last trading session at $15.19.

NCLH’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. It is also graded F for Stability and Sentiment and a D for Value and Quality. The stock is ranked last in the Travel – Cruises industry.

In addition to the POWR Rating grades I have just highlighted, you can see the NCLH rating for Momentum and Growth here.

CCL shares were trading at $10.04 per share on Wednesday morning, down $0.38 (-3.65%). Year-to-date, CCL has declined -50.10%, versus a -17.77% rise in the benchmark S&P 500 index during the same period.

About the Author: Komal Bhattar

Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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