Norwegian Cruise Line received an upgrade Wednesday and Royal Caribbean saw its price target hiked ahead of Q3 results later this month. Meanwhile, Miami-based cruise operators braced for Hurricane Milton to make landfall on Florida's west coast.
$20 Per-Share Earnings
Citi on Wednesday opened a "90-day positive catalyst" watch for Royal Caribbean ahead of its third-quarter report on Oct. 29, The Fly reported. The firm expects Royal Caribbean to announce a new long-term plan within the next two quarters, which will likely be in conjunction with its Q3 or Q4 report. Citi said it doesn't see any reason that the cruise operator can't achieve $20 per share in earnings.
"While this would be a bold target at first blush, we do not believe that the building blocks are overly optimistic," Citi wrote. The firm's data analysis suggests this growth and the recent rally in the cruise space "has real legs" into 2025 and beyond.
Citi hiked its price target on Royal Caribbean stock to $253 from $204 and kept a buy rating on the shares.
Annual Earnings Growth Of 30%
Elsewhere, Citi also upgraded Norwegian Cruise Line to buy from neutral and lifted its price target to 30 from 20. The firm cited the recent cruise rally which should continue beyond 2025, as well as Norwegian's strategy shift. Norwegian Cruise in May announced its new "Charting the Course" strategy, which includes investment initiatives in the company culture and employees, guest product offerings, Norwegian's growth platform, as well as optimizing performance.
By the end of 2026, Norwegian expects to achieve adjusted earnings of $2.45 per share. That represents a two-year compound annual growth rate of over 30% from 2024 to 2026.
Citi said the strategy shift gives it confidence that the "considerable pricing opportunity will not be offset by runaway costs."
The firm estimates that Norwegian could achieve 23% annual earnings growth over the next three years. That could stretch closer to 30% if the cruise operator can sustain its 2.5% yield/cost spread. Either outcome equates to "big earnings upside and multiple expansion," Citi wrote.
Hurricane Milton Impact
Meanwhile, Hurricane Milton moved toward Florida's west coast on Wednesday. Still ranked as a category 5 storm, meteorologists expect to inflict significant damage in the Tampa area after it makes landfall this afternoon. And Tampa's busy commercial port was completely closed as of Wednesday morning.
All three cruise line industry leaders—Royal Caribbean, Carnival and Norwegian Cruise Line—are based in Miami, which is on Florida's East Coast and well south of Milton's projected track.
Royal Caribbean on Tuesday announced it changed itineraries for eight ships to avoid the storm.
Carnival adjusted the itineraries for seven of its ships in the storm zone.
Multiple theme parks in Florida also altered or halted operations in anticipation of the hurricane, including Disney's Walt Disney World, SeaWorld, Legoland and Universal Orlando.
Royal Caribbean And Cruise Stocks
Royal Caribbean stock surged 5.3% Wednesday.
RCL rallied 49% this year. The stock is extended after a September breakout.
Norwegian Cruise shares rallied nearly 11% Wednesday to break out above a 20.65 buy point for a double-bottom base.
NCLH has been mired in consolidation for 15 months, but the stock jumped 15% in 2024.
Meanwhile, Carnival stock also popped 7% Wednesday to break out above a 19.09 cup-with-handle buy point.
CCL stock has been stuck below a ceiling near 20 over the last 15 months. Carnival shares climbed about 9% this year.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
