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Here's Why Investors Should Retain Carnival (CCL) Stock Now
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Carnival Corporation & plc (CCL - Free Report) is likely to benefit from the resumption of operations, improved booking trends and fleet-expansion efforts. However, disruption in booking trends due to geopolitical tensions and a rise in fuel prices remain headwinds.
Let us discuss why investors should hold on to the stock for the time being.
Key Growth Drivers
Following the coronavirus-induced shutdown, the company has commenced operations. In the first quarter of fiscal 2022, the company resumed cruise operations with ten additional ships, leading to 60% of its fleet capacity (in guest cruise operations) compared with 47% reported in the previous quarter. As of Mar 22, 2022, the company resumed operations at 75% of its fleet capacity. It intends to have its remaining fleet in operation for the 2022 summer season. The company stated plans to restart Australia operations by the end of May 2022.
Carnival announced that booking volumes and book positions are very encouraging. Although the Omicron variant negatively impacted bookings in the initial part of first-quarter fiscal 2022, sequential improvements are being witnessed in weekly booking volumes for future sailings.
The company stated that cumulative advance bookings for the second half of 2022 are at the lower end of the historical range, while cumulative advanced bookings for the first half of 2023 are at the higher end of historical ranges than the 2019 levels. Emphasis on price maintenance and comparable itinerary offerings added to the positives. Total customer deposits as of Feb 28 were $3.7 billion compared with $3.5 billion as of Nov 30, 2021. The company intends to focus on advertisement campaigns and promotional initiatives to drive demand in the upcoming periods.
Carnival continues to focus on fleet expansion to drive growth. In the first quarter of fiscal 2022, the company announced the addition of Costa Toscana, AIDAcosma and Discovery Princess to its fleet of efficient ships. It stated that the addition of ships coupled with the removal of less efficient ships is likely to pave the way for a 4% reduction in ship level unit cost in the upcoming periods, thereby enhancing the top and bottom lines.
Meanwhile, the company emphasized the exit of 22 less-efficient ships from its fleet (since 2019). Although the initiative contracted capacity growth to 2.2% (compounded annually from 2019 through 2025), the company remains optimistic about replacement with new ships and capitalization of pent-up demand.
Going forward, it anticipates 50% of its capacity to comprise newly delivered, larger and more efficient ships, thereby making way for a return to profitability and improvement in its return on invested capital. The company anticipates the fleet optimization initiative to boost revenues, backed by a rise in premium-priced balcony cabins (7 percentage points), an improved platform for onboard revenue opportunities as well as a reduction in ship level unit costs. Meanwhile, the company continues to focus on LNG-facilitated ships to drive growth.
This, along with a focus on itinerary optimization, technology upgrades, waste-management lighting, shore power capabilities and R&D investments (for low carbon fuel options), is likely to benefit the company in the upcoming periods.
Concerns
Image Source: Zacks Investment Research
Shares of Carnival have declined 28.2% in the past year compared with the industry’s 12.9% fall. The downside mainly resulted from the coronavirus crisis.
In the first quarter of fiscal 2022, the company’s occupancy, as well as bookings for near-term sailings, was negatively impacted by the Omicron variant. Negative consumer confidence was witnessed on account of complex and changing regulations and protocols, leading to friction in cross-border travel, labor, supply chain, and itinerary planning. This, along with higher cancellations resulting from increased pre-travel positive test results and challenges in the availability of timely pre-travel tests, added to the downside. Owing to the headwinds, occupancy for the fiscal first quarter was 54%, down from 58% reported in the fourth quarter of 2021.
The company’s operations are likely to be influenced by the uncertainty pertaining to the Russia invasion of Ukraine. Also, geopolitical developments have pushed fuel curves higher. Due to the war, management has decided to withdraw all activity in Russia (which represents 4.6% of capacity for the remainder of the year). The company anticipates the close-end nature of the deployment change and its inability to find alternatives for the itineraries to disrupt booking patterns for some time.
Funko sports a Zacks Rank #1 at present. FNKO has a trailing four-quarter earnings surprise of 96.2%, on average. Shares of FNKO have declined 9.2% in the past year.
The Zacks Consensus Estimate for FNKO’s current financial-year sales and EPS (earnings per share) suggests growth of 22.7% and 26.8%, respectively, from the respective year-ago period’s levels.
JAKKS Pacific presently sports a Zacks Rank #1. JAKK has a trailing four-quarter earnings surprise of 63.1%, on average. Shares of the company have surged 106.6% in the past year.
The Zacks Consensus Estimate for JAKK’s current financial-year sales and EPS indicates growth of 4.4% and 8.5%, respectively, from the year-ago period’s levels.
Bluegreen Vacations presently carries a Zacks Rank #2 (Buy). BVH has a trailing four-quarter earnings surprise of 425.1%, on average. The stock has surged 71.5% in the past year.
The Zacks Consensus Estimate for BVH’s current financial-year sales and EPS indicates growth of 8.3% and 20.8%, respectively, from the corresponding year-ago period’s levels.
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Here's Why Investors Should Retain Carnival (CCL) Stock Now
Carnival Corporation & plc (CCL - Free Report) is likely to benefit from the resumption of operations, improved booking trends and fleet-expansion efforts. However, disruption in booking trends due to geopolitical tensions and a rise in fuel prices remain headwinds.
Let us discuss why investors should hold on to the stock for the time being.
Key Growth Drivers
Following the coronavirus-induced shutdown, the company has commenced operations. In the first quarter of fiscal 2022, the company resumed cruise operations with ten additional ships, leading to 60% of its fleet capacity (in guest cruise operations) compared with 47% reported in the previous quarter. As of Mar 22, 2022, the company resumed operations at 75% of its fleet capacity. It intends to have its remaining fleet in operation for the 2022 summer season. The company stated plans to restart Australia operations by the end of May 2022.
Carnival announced that booking volumes and book positions are very encouraging. Although the Omicron variant negatively impacted bookings in the initial part of first-quarter fiscal 2022, sequential improvements are being witnessed in weekly booking volumes for future sailings.
The company stated that cumulative advance bookings for the second half of 2022 are at the lower end of the historical range, while cumulative advanced bookings for the first half of 2023 are at the higher end of historical ranges than the 2019 levels. Emphasis on price maintenance and comparable itinerary offerings added to the positives. Total customer deposits as of Feb 28 were $3.7 billion compared with $3.5 billion as of Nov 30, 2021. The company intends to focus on advertisement campaigns and promotional initiatives to drive demand in the upcoming periods.
Carnival continues to focus on fleet expansion to drive growth. In the first quarter of fiscal 2022, the company announced the addition of Costa Toscana, AIDAcosma and Discovery Princess to its fleet of efficient ships. It stated that the addition of ships coupled with the removal of less efficient ships is likely to pave the way for a 4% reduction in ship level unit cost in the upcoming periods, thereby enhancing the top and bottom lines.
Meanwhile, the company emphasized the exit of 22 less-efficient ships from its fleet (since 2019). Although the initiative contracted capacity growth to 2.2% (compounded annually from 2019 through 2025), the company remains optimistic about replacement with new ships and capitalization of pent-up demand.
Going forward, it anticipates 50% of its capacity to comprise newly delivered, larger and more efficient ships, thereby making way for a return to profitability and improvement in its return on invested capital. The company anticipates the fleet optimization initiative to boost revenues, backed by a rise in premium-priced balcony cabins (7 percentage points), an improved platform for onboard revenue opportunities as well as a reduction in ship level unit costs. Meanwhile, the company continues to focus on LNG-facilitated ships to drive growth.
This, along with a focus on itinerary optimization, technology upgrades, waste-management lighting, shore power capabilities and R&D investments (for low carbon fuel options), is likely to benefit the company in the upcoming periods.
Concerns
Image Source: Zacks Investment Research
Shares of Carnival have declined 28.2% in the past year compared with the industry’s 12.9% fall. The downside mainly resulted from the coronavirus crisis.
In the first quarter of fiscal 2022, the company’s occupancy, as well as bookings for near-term sailings, was negatively impacted by the Omicron variant. Negative consumer confidence was witnessed on account of complex and changing regulations and protocols, leading to friction in cross-border travel, labor, supply chain, and itinerary planning. This, along with higher cancellations resulting from increased pre-travel positive test results and challenges in the availability of timely pre-travel tests, added to the downside. Owing to the headwinds, occupancy for the fiscal first quarter was 54%, down from 58% reported in the fourth quarter of 2021.
The company’s operations are likely to be influenced by the uncertainty pertaining to the Russia invasion of Ukraine. Also, geopolitical developments have pushed fuel curves higher. Due to the war, management has decided to withdraw all activity in Russia (which represents 4.6% of capacity for the remainder of the year). The company anticipates the close-end nature of the deployment change and its inability to find alternatives for the itineraries to disrupt booking patterns for some time.
Zacks Rank & Key Picks
Carnival currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Consumer Discretionary sector are Funko, Inc. (FNKO - Free Report) , JAKKS Pacific, Inc. (JAKK - Free Report) and Bluegreen Vacations Holding Corporation .
Funko sports a Zacks Rank #1 at present. FNKO has a trailing four-quarter earnings surprise of 96.2%, on average. Shares of FNKO have declined 9.2% in the past year.
The Zacks Consensus Estimate for FNKO’s current financial-year sales and EPS (earnings per share) suggests growth of 22.7% and 26.8%, respectively, from the respective year-ago period’s levels.
JAKKS Pacific presently sports a Zacks Rank #1. JAKK has a trailing four-quarter earnings surprise of 63.1%, on average. Shares of the company have surged 106.6% in the past year.
The Zacks Consensus Estimate for JAKK’s current financial-year sales and EPS indicates growth of 4.4% and 8.5%, respectively, from the year-ago period’s levels.
Bluegreen Vacations presently carries a Zacks Rank #2 (Buy). BVH has a trailing four-quarter earnings surprise of 425.1%, on average. The stock has surged 71.5% in the past year.
The Zacks Consensus Estimate for BVH’s current financial-year sales and EPS indicates growth of 8.3% and 20.8%, respectively, from the corresponding year-ago period’s levels.