Why Carnival Corporation, Royal Caribbean and Norwegian Cruise Line all jumped today


What happened

A series of good news could not keep cruise ship stocks afloat in a declining stock market on Thursday – but Friday rises a little more for cruise ship stocks.

At 11:45 a.m. EDT, the actions of Norwegian Cruise Line Holdings (NASDAQ: NCLH) helped lead the stock market higher with a gain of 4.5%. Royal Caribbean (NYSE: RCL) up 5.9%, while the industry giant Carnival Corporation (NYSE: CCL) (NYSE: CUK) increased 8.8%.

Here are 3 major cruise lines stocks: which one would you choose? Image source: Getty Images.

So what

Carnival Corporation probably deserves the lion’s share of the credit for today’s rally. This morning, Carnival filed an 8-K trade update with the SEC. Carnival said it still expects to spend cash at the rate of “about $ 650 million” per month until the end of this year. However, Carnival also continues to take steps to reduce this burn rate.

In particular, while last month Carnival planned to sell six ships in its fleet to cut capital spending, Carnival says total ship sales could double that number. Indeed, Carnival already sold a ship in June. At least five more, and possibly up to eight more sales are expected “within the next 90 days”. Four other sales, agreed last year, have yet to close. In total, the company plans to unload 13 ships, or approximately 9% of its total capacity, which will help move the company toward its goal of reducing cash consumption rates to $ 250 million per month or less.

At the same time as it reduces costs, Carnival notes that it continues to raise funds to help it weather the recession. Since March, the company said it had “raised more than $ 10 billion through a series of financing transactions”, including taking out $ 2.8 billion in additional loans on June 30, and negotiating changes to ” debt cancellation ”putting the principal repayment on over $ 10 billion. $ 14 billion in debt until his situation stabilizes.

Finally, Carnival reiterated its announcement, confirmed yesterday, of the resumption of cruises outside Germany via its cruise brand AIDA. AIDA is just one of nine Carnival brands, but any movement out of port at this point should be considered good news.

Now what

Carnival is not the only cruise line company to announce good news today. Elsewhere in the sector, his rival Royal Caribbean has just announced that he has negotiated the purchase of a third of the Silversea Cruises subsidiary that he did not already own, paying the acquisition cost of 245 million dollars with his own common stock (presumably to keep cash – expect this to remain a theme in the cruise industry for the foreseeable future).

This is a curious development – and perhaps even more important for investors in the cruise industry than the update on Carnival activities. Why, one might wonder, Royal Caribbean would double its activity by spending even its own actions to gain a bigger footprint in cruises, if it expected things to continue to improve worst for the cruise industry?

The obvious answer is no. And the logical conclusion is therefore that Royal Caribbean is beginning to see a light at the end of this long tunnel. Royal Caribbean is positioning itself to capture more of the profits once consumers return to spending their discretionary money on cruises. So it’s a bullish move for Royal Caribbean investors, and probably also for Carnival and Norwegian Cruise Line Holdings investors.


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