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Is Carnival Stock a Buy, Sell or Retain at a 12.1x P/E?
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Carnival Corporation & plc’s (CCL - Free Report) stock is trading at a discount compared with the Zacks Leisure and Recreation Services industry. With a forward 12-month Price/Earnings ratio of 12.1x, it sits below the industry average of 17.34x and the Consumer Discretionary sector’s 18.01x.
In the past year, CCL has rallied 29% compared with the industry’s 23.7% appreciation. However, the metric lagged the S&P 500’s 33.7% rise. In contrast, other players in the cruise industry have posted even stronger gains, with Royal Caribbean Cruises Ltd. (RCL - Free Report) soaring 92.9%, Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) rising 31.3% and OneSpaWorld Holdings Limited (OSW - Free Report) climbing 47.1%.
Stock Price Performance
Image Source: Zacks Investment Research
Technical indicators suggest continued strong performance for CCL. The stock trades above its 50-day moving averages, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in CCL's financial health and prospects.
50-Day Moving Averages
Image Source: Zacks Investment Research
Estimate Revision Favoring the CCL Stock
Analysts have recently revised their earnings estimates for Carnival upward, further boosting sentiment. In the past seven days, the Zacks Consensus Estimate for 2024 earnings per share has increased by 1.7% to $1.21, while the 2025 estimate has moved up 2.6% to $1.57.
Image Source: Zacks Investment Research
The stock’s compelling discounted valuation and strong upward price momentum, bullish technical signals and upward estimate revisions highlight its continued appeal to investors.
Solid Booking Momentum
Carnival is experiencing strong booking momentum heading into 2025, with record volumes that have already surpassed 2024 in pricing and occupancy. The company continues to witness strength in pricing for the North America and Australia (NAA) and Europe segments for the third and the fourth quarter of 2024 on a year-over-year basis. Its efforts to extend the booking curve and leverage favorable pricing trends resulted in record cumulative bookings for the remainder of 2024, with occupancy rates above 2023 levels.
Rate Cut to Help CCL
In its latest policy meeting, the Federal Reserve reduced interest rates by 50 basis points to stimulate the economy and support the labor market. The Fed has kept the key interest rates at 4.75% to 5% and eased its monetary policy for the first time in four years. According to the Fed's Summary of Economic Projections, officials anticipate another half-point rate cut later this year, with additional cuts expected in 2025 and 2026.
The company is likely to benefit from the decrease in interest rates. Although the company carries substantial debt, much of which was incurred to remain afloat during the pandemic, there’s potential for relief. Total debt (current and long-term) as of May 31, 2024, was $29.3 billion. If CCL can refinance a portion of this debt at more favorable rates, it could see a reduction in interest costs, further boosting its financial performance.
Fleet Expansion to Aid CCL
Carnival focuses on fleet expansion to drive growth. The company is actively pursuing additional initiatives to sustain its momentum and tap into untapped revenue opportunities. Three new ships are in development, which are poised to generate heightened interest and demand for their respective brands. This includes Carnival Jubilee (Carnival Cruise Line's third Excel-class ship), Sun Princess and Queen Anne (a new flagship for Cunard).
During the fiscal second quarter, CCL launched Queen Anne in Liverpool, Sun Princess in Barcelona, and Carnival Firenze in Long Beach. These launches garnered substantial media coverage and boosted bookings, particularly Sun Princess, which received positive guest feedback and demonstrated strong performance with high satisfaction scores and revenue yield. While these ships contributed to the strong yield improvement in the quarter, CCL also witnessed strong double-digit growth in existing fleet yields.
End Notes
Investors should consider buying Carnival due to its strong growth potential, solid financial performance and strategic advantages. Trading at a discounted P/E, below the industry average, CCL offers compelling value. The Zacks Rank #1 (Strong Buy) company has shown strong booking momentum for 2024 and 2025, with record volumes and higher pricing driven by favorable demand trends. Despite carrying significant debt from the pandemic, CCL could benefit from expected interest rate cuts, potentially reducing interest expenses and improving its financial health. With positive technical indicators, upward earnings revisions and strong growth opportunities, CCL presents an attractive buy for investors.
Image: Bigstock
Is Carnival Stock a Buy, Sell or Retain at a 12.1x P/E?
Carnival Corporation & plc’s (CCL - Free Report) stock is trading at a discount compared with the Zacks Leisure and Recreation Services industry. With a forward 12-month Price/Earnings ratio of 12.1x, it sits below the industry average of 17.34x and the Consumer Discretionary sector’s 18.01x.
In the past year, CCL has rallied 29% compared with the industry’s 23.7% appreciation. However, the metric lagged the S&P 500’s 33.7% rise. In contrast, other players in the cruise industry have posted even stronger gains, with Royal Caribbean Cruises Ltd. (RCL - Free Report) soaring 92.9%, Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) rising 31.3% and OneSpaWorld Holdings Limited (OSW - Free Report) climbing 47.1%.
Stock Price Performance
Image Source: Zacks Investment Research
Technical indicators suggest continued strong performance for CCL. The stock trades above its 50-day moving averages, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in CCL's financial health and prospects.
50-Day Moving Averages
Image Source: Zacks Investment Research
Estimate Revision Favoring the CCL Stock
Analysts have recently revised their earnings estimates for Carnival upward, further boosting sentiment. In the past seven days, the Zacks Consensus Estimate for 2024 earnings per share has increased by 1.7% to $1.21, while the 2025 estimate has moved up 2.6% to $1.57.
Image Source: Zacks Investment Research
The stock’s compelling discounted valuation and strong upward price momentum, bullish technical signals and upward estimate revisions highlight its continued appeal to investors.
Solid Booking Momentum
Carnival is experiencing strong booking momentum heading into 2025, with record volumes that have already surpassed 2024 in pricing and occupancy. The company continues to witness strength in pricing for the North America and Australia (NAA) and Europe segments for the third and the fourth quarter of 2024 on a year-over-year basis. Its efforts to extend the booking curve and leverage favorable pricing trends resulted in record cumulative bookings for the remainder of 2024, with occupancy rates above 2023 levels.
Rate Cut to Help CCL
In its latest policy meeting, the Federal Reserve reduced interest rates by 50 basis points to stimulate the economy and support the labor market. The Fed has kept the key interest rates at 4.75% to 5% and eased its monetary policy for the first time in four years. According to the Fed's Summary of Economic Projections, officials anticipate another half-point rate cut later this year, with additional cuts expected in 2025 and 2026.
The company is likely to benefit from the decrease in interest rates. Although the company carries substantial debt, much of which was incurred to remain afloat during the pandemic, there’s potential for relief. Total debt (current and long-term) as of May 31, 2024, was $29.3 billion. If CCL can refinance a portion of this debt at more favorable rates, it could see a reduction in interest costs, further boosting its financial performance.
Fleet Expansion to Aid CCL
Carnival focuses on fleet expansion to drive growth. The company is actively pursuing additional initiatives to sustain its momentum and tap into untapped revenue opportunities. Three new ships are in development, which are poised to generate heightened interest and demand for their respective brands. This includes Carnival Jubilee (Carnival Cruise Line's third Excel-class ship), Sun Princess and Queen Anne (a new flagship for Cunard).
During the fiscal second quarter, CCL launched Queen Anne in Liverpool, Sun Princess in Barcelona, and Carnival Firenze in Long Beach. These launches garnered substantial media coverage and boosted bookings, particularly Sun Princess, which received positive guest feedback and demonstrated strong performance with high satisfaction scores and revenue yield. While these ships contributed to the strong yield improvement in the quarter, CCL also witnessed strong double-digit growth in existing fleet yields.
End Notes
Investors should consider buying Carnival due to its strong growth potential, solid financial performance and strategic advantages. Trading at a discounted P/E, below the industry average, CCL offers compelling value. The Zacks Rank #1 (Strong Buy) company has shown strong booking momentum for 2024 and 2025, with record volumes and higher pricing driven by favorable demand trends. Despite carrying significant debt from the pandemic, CCL could benefit from expected interest rate cuts, potentially reducing interest expenses and improving its financial health. With positive technical indicators, upward earnings revisions and strong growth opportunities, CCL presents an attractive buy for investors.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.