ZACKS·2025-12-31 16:25Core Insights - Carnival Corporation & plc (CCL) and Norwegian Cruise Line Holdings Ltd. (NCLH) are both entering 2026 with strong demand trends and strategies that are reshaping their long-term earnings profiles [1] - Carnival has gained momentum following a strong finish to 2025, reflecting growing investor confidence in its operational turnaround [1] - Norwegian Cruise is advancing a measured, ROI-focused transformation aimed at enhancing yields and margin durability [1] Carnival Corporation (CCL) - Carnival is evolving towards a destination-led cruise model, investing in exclusive private destinations and fleet enhancements to support sustained yield growth [3] - The company reported record revenues, EBITDA, and operating income in 2025, with operating margins expanding significantly and return on invested capital rising above 13%, the highest in nearly two decades [4] - Key growth strategies include expanding its portfolio of private destinations, such as Celebration Key, which is expected to deepen customer engagement and improve itinerary economics [5] - However, unit costs are expected to rise by approximately 3.25% year-over-year in 2026 due to inflation and increased operational costs [6] Norwegian Cruise Line Holdings (NCLH) - Norwegian Cruise is executing its "Charting the Course" strategy, focusing on disciplined capacity growth and investments in high-impact destinations to support yield expansion [7] - The transformation of Great Stirrup Cay is a key initiative, with plans for new guest amenities and infrastructure to enhance load factors and yield [9] - Norwegian Cruise is increasing its exposure to the luxury market, with solid demand trends for its premium brands, Oceania Cruises and Regent Seven Seas [10] - The company is on track to deliver over $300 million in cumulative cost savings, helping to keep adjusted net cruise cost growth below inflation [11] - Elevated leverage relative to peers and sensitivity to external variables may temper near-term flexibility [12] Financial Performance and Valuation - The Zacks Consensus Estimate for Carnival's fiscal 2026 sales and EPS suggests increases of 4.1% and 9.3%, respectively, with earnings estimates rising by 2.5% in the past 60 days [13] - For Norwegian Cruise, the 2026 sales and EPS estimates suggest increases of 10.2% and 26.9%, respectively, although earnings estimates have declined by 0.4% in the past 60 days [16] - Carnival stock has gained 23.6% over the past year, outperforming the industry's rise of 5.9% and the S&P 500's growth of 19.7%, while Norwegian Cruise shares have declined by 12.9% [18] - Carnival is trading at a forward P/E ratio of 12.40, below the industry average of 17.17, while NCLH's forward P/E is at 8.39 [21] Overall Analysis - Carnival holds a modest positioning advantage over Norwegian Cruise as the industry moves into 2026, supported by stronger cash flow momentum and an expanding private-destination footprint [23] - Norwegian Cruise's yield-focused strategy and premium brand exposure offer long-term potential, but elevated leverage and sensitivity to external variables temper near-term flexibility [24] - Both companies currently carry a Zacks Rank 3 (Hold), with Carnival slightly standing out due to clearer execution trends and a business model aligned with sustaining profitability [25]