Cruise Industry's Recovery: A Look at Carnival and Royal Caribbean

The cruise ship industry has rebounded significantly after the COVID-19 pandemic, with both Carnival and Royal Caribbean showing strong revenue growth and profit margins. However, concerns over high debt levels and cash flow issues may pose risks for investors.

Date: 08-10-2024

AI Rating: 5

Carnival Overview

Carnival has carried 3.9 million passengers last quarter, an increase from 3.6 million the previous year. The company’s revenue for the last 12 months stands at $24.5 billion, with an operating margin of 14%, translating to $3.4 billion in earnings.

Royal Caribbean Overview

Royal Caribbean reported over 2 million passengers in the quarter ending in June, generating $15.3 billion in annual revenue. It boasts an operating margin of 24%, thus producing $3.68 billion in annual operating earnings, more than Carnival.

Debt and Cash Flow Concerns

Despite strong revenue and profit margins, both companies face notable challenges due to high debt levels. Royal Caribbean carries over $20 billion in debt and nearly zero cash, while Carnival has approximately $30 billion in debt against $1.5 billion in cash. This heavy debt burden may hinder future financial flexibility and growth potential.

Conclusion

While both companies have shown recovery and positive trends, the significant debt and inconsistent cash flow make them risky investments. Potential downturns in consumer spending could exacerbate their challenges, urging caution among investors.

Stocks: RCL CCL