On Wednesday, cruise and airline stocks continued to climb. Notably, Norwegian Cruise Line (NCLH, Financial) surged over 8%, Royal Caribbean (RCL) rose more than 3.7%, and Carnival Cruise Line (CCL) increased by over 5%. Among the airline stocks, American Airlines (AAL) saw an increase of over 1%, Delta Air Lines (DAL) rose by 1.7%, and United Airlines (UAL) edged up by 0.27%.
This upward trend comes as Citigroup expressed optimism about Norwegian Cruise Line and Royal Caribbean. Specifically, Citigroup upgraded Norwegian Cruise Line from a “neutral” to a “buy” rating. Analysts at Citigroup, including James Hardiman, highlighted the potential for significant earnings growth and multiple expansion for Norwegian. The company’s strategic changes suggest that pricing opportunities are unlikely to be offset by uncontrollable costs.
Hardiman estimates a compound annual growth rate in earnings per share of 23% over the next three years for Norwegian Cruise Line. If the company can maintain a revenue-to-cost growth margin of 2.5%, the earnings growth rate could potentially reach 30%.
