Wedbush Puts Norwegian Cruise Line On Top

Norwegian Cruise Line Holdings Ltd NCLH is the current best buy for investors choosing among the cruise names, an analyst said Friday.

Wedbush analyst James Hardiman cited the company's relatively young fleet, its recent $3 billion acquisition of the premium-priced Prestige Cruise International, and its "superior return profile.

Hardiman launched coverage on the company with an Outperform rating and $65 target.

The analyst also initiated with Neutral ratings on both Carnival Corp CCL and Royal Caribbean Cruises Ltd RCL, with targets of $52 and $92, respectively.

Hardiman said trends are improving within the industry as the Ebola scare recedes and a Caribbean inventory glut gets drawn down with ship redeployment to less crowded markets.

Norwegian's 7 percent return on invested capital in 2013, "while unimpressive in its own right," was 55 percent greater than that of Carnival and Royal Caribbean, said Hardiman, who expects the figure for Norwegian will hit at least 13 percent by 2017.

Carnival, with a market capitalization more than twice that of either Royal or Norwegian, has been hardest hit by an industry downturn in recent years.

It's also got the highest profile in a series of cruise ship disasters in 2013 that have hurt the industry. "We continue to be concerned with their longer-term brand strength," Hardiman said.

Carnival has a 43 percent market share in the cruise industry, versus 23 percent for Royal and 10 percent for Norwegian.

Hardiman praised Royal's operations and reputation, but said its shares could face short-term pressure from currency and fuel-cost headwinds.

Royal's 2015 outlook issued in late January fails to account for the rise in fuel prices that have since been seen, while the dollar has continued to strengthen.

Royal "has gotten the worst of this dynamic," Hardiman said, since fuel prices are lower than when Carnival issued guidance in December, and flat since Norwegian produced its forecast last month.