Pent-up demand for leisure travel has proved beneficial for the cruise industry. Given the industry tailwinds, let us evaluate the prospects of Carnival Corporation (CCL) and Lindblad Expeditions Holdings (LIND) to determine which has better upside potential.
While LIND looks better positioned than CCL based on a fundamental comparison of these stocks, I think it could be wise to wait for a better entry point in LIND.
CCL provides leisure travel services and sells its cruises primarily through travel agents, tour operators, vacation planners, and websites. On the other hand, LIND provides marine expedition adventures and travel experiences worldwide. It operates through the Lindblad and Land Experiences segment.
Before I compare the fundamentals of these stocks, let’s see what’s happening in the leisure travel space.
The travel industry’s post-pandemic rebound was exceptional, and it is anticipated to maintain the momentum despite the ongoing macroeconomic jitters. Cruises represent one of the main segments of the leisure travel sector. Cruise passenger volume is forecasted to reach 106% of 2019 levels in 2023, with 31.5 million passengers sailing.
In addition, onboard spending has been soaring because cruise lines have started bundling onboard purchases, enabling passengers to procure them in advance and develop them into inclusive cruise fares. Advanced bookings are anticipated to translate even more on ships.
CCL’s CEO Josh Weinstein said that the company has been working on improving its technology to capture pre-cruise onboard sales and incremental onboard revenue. The company is also refining its application to enhance customer communication and engagement to capture revenue efficiently.
Moreover, despite recessionary fears, Weinstein said, “We don't see a slowdown. We are very well-booked for the next 12 months and those bookings are sticky.”
CCL has gained 125.4% over the past six months versus LIND’s 47.8% returns. Over the past month, CCL has gained 53.3% to close the last trading session at $17.29, while LIND has gained 8% to close the last trading session at $10.14.
Latest Developments
CCL saw a persistent demand acceleration, with total bookings made during the last quarter reaching a new all-time high for all future sailings. Booking volumes for the second quarter exceeded the first quarter's booking volumes, the previous record high.
CCL is introducing its SEA Change Program, a set of key performance targets designed to reflect the achievement of important strategic goals over a three-year period ending in 2026, which includes a more than 20% reduction in carbon intensity compared to 2019, a 50% increase in adjusted EBITDA per ALBD compared to 2023 June guidance, and 12% adjusted return on invested capital (ROIC).
On June 20, LIND-National Geographic, the recognized global leader and pioneer of modern expedition travel to the world's wildest and most remote places, is teaming up with FOOD & WINE, a leading authority on the best of what's new in food, drink, travel, design, and entertaining, for a new series of gastronomic expeditions.
On April 17, LIND announced that it priced $275 million aggregate principal amount of 9% senior secured notes due 2028 at par.
Furthermore, LIND currently has a $35 million stock repurchase plan in place. As of April 24, 2023, the company had repurchased 875,218 shares and 6 million warrants under the plan for a total of $23 million and had $12 million remaining under the plan.
Recent Financial Results
For the fiscal second quarter that ended May 31, 2023, CCL’s revenues stood at $4.91 billion. The company’s operating expenses grew 23.7% year-over-year to $4.79 billion. Its adjusted net loss and adjusted loss per share stood at $395 million and $0.31, respectively.
As of May 31, 2023, CCL’s accumulated deficit came in at $841 million, compared to the retained earnings of $269 million as of November 30, 2022. As of May 31, 2023, its total current assets stood at $6.21 million, compared to $7.49 million as of November 30, 2022.
For the fiscal first quarter that ended March 31, 2023, LIND’s tour revenues increased 111.4% year-over-year to $143.40 million. Its operating income stood at $12.47 million, compared to an operating loss of $34.25 million in the year-ago quarter.
Net income attributable to LIND came in at $621 thousand, compared to a net loss of $41.72 million in the previous year. For the same quarter, net cash provided by investing activities came in at $8.74 million, compared to net cash used in investing activities of $7.52 million. Also, the company’s adjusted EBITDA stood at $27.19 million, compared to an adjusted EBITDA of negative $21.22 million.
Past and Expected Financial Performance
CCL’s revenue has grown at a 1.3% CAGR over the past three years, while LIND’s revenue has grown at 14.1% and 11.7% CAGRs over the past three and five years, respectively.
CCL’s EBITDA has declined at 21.8% and 25.1% CAGRs over the past three and five years, respectively.
LIND’s total assets grew at 3.2% and 11.5% CAGRs over the past three and five years, respectively.
CCL’s revenue for the fiscal year ending November 2023 is expected to increase 75% year-over-year to $21.30 billion, while its EPS is expected to remain negative at $0.15. Moreover, CCL failed to surpass consensus EPS estimates in three of the four trailing quarters, which is disappointing.
For the fiscal years ending December 2023 and 2024, LIND’s revenue is expected to increase 35% and 8.8% year-over-year to $569.13 million and $619.43 million, respectively. For the fiscal years 2023 and 2024, Street expects its EPS to come in at negative $0.39 and negative $0.08, up 82.7% and 79.2% year-over-year, respectively.
Furthermore, LIND’s EPS for the fiscal third quarter ending September 2023 is expected to come in at $0.11, whereas its revenue is expected to come in at $172.59 million, up 19.2% year-over-year. The company surpassed revenue estimates in each of the four trailing quarters, which is impressive.
Profitability
LIND has a trailing-12-month gross profit margin of 40.18% compared to CCL’s 42.05%. However, LIND’s trailing-12-month asset turnover of 0.62x compares to CCL’s 0.33x. Also, LIND’s trailing-12-month revenue per employee of $478.98 thousand compares with CCL’s $139.87 thousand.
Thus, LIND is more profitable.
Valuation
In terms of forward EV/Sales, LIND is trading at 1.94x, 20.8% lower than CCL, which is currently trading at 2.45x. LIND’s forward Price/Sales multiple of 0.95 is 7.8% lower than CCL’s 1.03.
POWR Ratings
LIND has an overall rating of C, translating to Neutral in our POWR Ratings system. On the other hand, CCL has an overall D rating, which equates to a Sell. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories.
LIND’s Quality grade of C is substantiated by its trailing-12-month gross profit margin of 40.18%, which is 14.2% higher than the industry average of 35.19%, and trailing-12-month EBITDA margin of 5.70%, which is 46.5% lower than the industry average of 10.65%.
Conversely, CCL’s D grade for Quality is evident from its trailing-12-month EBITDA margin of 7.26%, which is 31.8% lower than the 10.65% industry average, and its trailing-12-month ROCE of negative 49.09%, compare to the industry average of 10.03%.
Moreover, LIND’s B grade for Momentum is justified as the stock trades above its 100-day and 200-day moving averages of $10.08 and $9.54, respectively.
CCL’s Momentum grade of B is in sync with the stock trading below its 100-day and 200-day moving averages of $11.06 and $10.11, respectively.
Within the F-rated Travel - Cruises industry, LIND is ranked #1, while CCL is ranked #3 out of the four stocks.
Beyond what we’ve stated above, we have also rated both stocks for Growth, Value, Sentiment, and Stability. Get all ratings of LIND here. To view CCL’s ratings, click here.
The Winner
Increased booking should help the cruise industry maintain a solid momentum in the near term.
However, LIND’s attractive valuation, robust profitability scenario, and strong top-line estimates make it better positioned than CCL. However, waiting for a better entry point in LIND could be wise.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Travel - Cruises industry here.
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CCL shares were trading at $17.69 per share on Thursday morning, up $0.40 (+2.31%). Year-to-date, CCL has gained 119.48%, versus a 15.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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