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Here's Why Investors Should Retain Carnival (CCL) Stock Now
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Carnival Corporation & plc (CCL - Free Report) will likely benefit from strong demand, solid booking trends and new ship additions. Also, its focus on SEA Change program bodes well. However, increased expenses are a concern.
Let us discuss why investors should retain the stock for the time being.
Key Growth Drivers
Shares of Carnival have gained 112.9% in the past six months compared with the industry’s 26.7% growth. The company has been benefiting from solid demand for cruising, strong pricing environment and capacity-generation initiatives. Also, it stated the benefits from new marketing campaign and demand-generation efforts. During the second quarter of fiscal 2023, the company's search performance increased 63% from the prior quarter’s figure and 87% from 2019 levels.
Image Source: Zacks Investment Research
The company gains from solid booking trends. During the fiscal second quarter, the company reported solid bookings for the North America and Australia (NAA) and Europe segments. The upside was backed by strong demand, bundled package offerings and pre-cruise sales. During the quarter, the company's NAA bookings curve is further out than 2019 levels, while the European recovery trajectory brought it within 10% of 2019 levels. The company stated that its remaining 2023 cumulative advanced booked position is at increased prices compared with 2019 levels. Total customer deposits as of May 31 were at an all-time high of $7.2 billion compared with $5.7 billion reported in the previous quarter. The amount was higher than $6 billion reported in 2019.
Increased focus on new ship additions bode well. In second-quarter fiscal 2023, the company had 14 newly-delivered ships, comprising about 25% of its capacity. It announced the addition of Carnival Venezia to its Carnival Cruise Line fleet. The company anticipates the delivery of the Seabourn luxury expedition ship in fiscal 2023. Also, it emphasized on a pipeline of four ships to be delivered through 2025.
During the second quarter of fiscal 2023, CCL announced its SEA Change Program. The program was started with the intention of achieving sig nificant strategic objectives over a three-year period concluding in 2026. The main performance goals are to increase adjusted EBITDA per ALBD by 50% (compared with the 2023 June guidance), reduce carbon intensity by more than 20% (relative to 2019) and achieve 12% adjusted return on invested capital.
Concerns
Carnival is bearing the brunt of high expenses for quite some time. During the fiscal second quarter, adjusted cruise costs (excluding fuel per ALBD) increased 13.5% (in constant currency) from 2019 levels. The upside was primarily driven by a rise in dry-dock related expenses, higher advertising investments and incentive compensation increases. For third-quarter fiscal 2023, the company anticipates adjusted cruise costs to increase in the range of 12.5-13.5% from 2019 levels.
Zacks Rank & Key Picks
Carnival currently carries a Zacks Rank #3 (Hold).
Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 26.4%, on average. Shares of RCL have surged 187.8% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Royal Caribbean Cruises’ 2023 sales and EPS indicates a rise of 48.7% and 162.9%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 147.9%, on average. Shares of TCOM have increased 24.8% in the past year.
The Zacks Consensus Estimate for Trip.com Group’s 2023 sales and EPS implies an increase of 101.6% and 531%, respectively, from the year-ago period’s levels.
OneSpaWorld Holdings Limited (OSW - Free Report) carries a Zacks Rank #2 (Buy). OSW has a trailing four-quarter earnings surprise of 65.8%, on average. Shares of OSW have increased 64.8% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS indicates a rise of 33.9% and 89.3%, respectively, from the 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) will likely benefit from strong demand, solid booking trends and new ship additions. Also, its focus on SEA Change program bodes well. However, increased expenses are a concern.
Let us discuss why investors should retain the stock for the time being.
Key Growth Drivers
Shares of Carnival have gained 112.9% in the past six months compared with the industry’s 26.7% growth. The company has been benefiting from solid demand for cruising, strong pricing environment and capacity-generation initiatives. Also, it stated the benefits from new marketing campaign and demand-generation efforts. During the second quarter of fiscal 2023, the company's search performance increased 63% from the prior quarter’s figure and 87% from 2019 levels.
Image Source: Zacks Investment Research
The company gains from solid booking trends. During the fiscal second quarter, the company reported solid bookings for the North America and Australia (NAA) and Europe segments. The upside was backed by strong demand, bundled package offerings and pre-cruise sales. During the quarter, the company's NAA bookings curve is further out than 2019 levels, while the European recovery trajectory brought it within 10% of 2019 levels. The company stated that its remaining 2023 cumulative advanced booked position is at increased prices compared with 2019 levels. Total customer deposits as of May 31 were at an all-time high of $7.2 billion compared with $5.7 billion reported in the previous quarter. The amount was higher than $6 billion reported in 2019.
Increased focus on new ship additions bode well. In second-quarter fiscal 2023, the company had 14 newly-delivered ships, comprising about 25% of its capacity. It announced the addition of Carnival Venezia to its Carnival Cruise Line fleet. The company anticipates the delivery of the Seabourn luxury expedition ship in fiscal 2023. Also, it emphasized on a pipeline of four ships to be delivered through 2025.
During the second quarter of fiscal 2023, CCL announced its SEA Change Program. The program was started with the intention of achieving sig nificant strategic objectives over a three-year period concluding in 2026. The main performance goals are to increase adjusted EBITDA per ALBD by 50% (compared with the 2023 June guidance), reduce carbon intensity by more than 20% (relative to 2019) and achieve 12% adjusted return on invested capital.
Concerns
Carnival is bearing the brunt of high expenses for quite some time. During the fiscal second quarter, adjusted cruise costs (excluding fuel per ALBD) increased 13.5% (in constant currency) from 2019 levels. The upside was primarily driven by a rise in dry-dock related expenses, higher advertising investments and incentive compensation increases. For third-quarter fiscal 2023, the company anticipates adjusted cruise costs to increase in the range of 12.5-13.5% from 2019 levels.
Zacks Rank & Key Picks
Carnival currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Consumer Discretionary sector are as follows:
Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 26.4%, on average. Shares of RCL have surged 187.8% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Royal Caribbean Cruises’ 2023 sales and EPS indicates a rise of 48.7% and 162.9%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 147.9%, on average. Shares of TCOM have increased 24.8% in the past year.
The Zacks Consensus Estimate for Trip.com Group’s 2023 sales and EPS implies an increase of 101.6% and 531%, respectively, from the year-ago period’s levels.
OneSpaWorld Holdings Limited (OSW - Free Report) carries a Zacks Rank #2 (Buy). OSW has a trailing four-quarter earnings surprise of 65.8%, on average. Shares of OSW have increased 64.8% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS indicates a rise of 33.9% and 89.3%, respectively, from the year-ago period’s levels.