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In the second quarter of fiscal 2024, Carnival reported stellar performance, with earnings per share (EPS) of 11 cents, beating the Zacks Consensus Estimate by 1200%. The reported figure also increased from the year-ago period’s loss of 31 cents per share. Revenues of $5.8 billion, slightly came ahead of the consensus mark of $5.7 billion and increased 17.7% on a year-over-year basis. Sustained demand strength and increased booking volumes primarily drove the company’s performance.
How Are Estimates Placed for CCL?
The Zacks Consensus Estimate for CCL’s fiscal third-quarter EPS is pegged at $1.16, suggesting 34.9% growth from 86 cents reported in the prior-year quarter. The consensus mark has increased by 0.9% in the past 30 days.
The consensus estimate for revenues is pegged at $7.8 billion, suggesting a 14% rise from the year-ago quarter's reported figure.
CCL’s Earnings Surprise History
CCL has an impressive track record of surpassing earnings expectations, exceeding the consensus mark in each of the trailing four quarters. The average surprise over this period is 320.4%, as shown in the chart below.
Image Source: Zacks Investment Research
Q3 Earnings Whispers
Our proven model predicts a likely earnings beat for Carnival this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: Carnival has an Earnings ESP of +0.40%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Carnival’s fiscal third-quarter performance is likely to have benefited from sustained demand strength, fleet-optimization efforts and new ship additions. This and strength in customer deposits, strong bookings and solid onboard spending are likely to have driven incremental revenue growth in the fiscal third quarter.
Our model estimates fiscal third-quarter passenger ticket revenues to rise 7.2% year over year to $4.9 billion. We expect onboard and other revenues to increase 22% year over year to $2.8 billion.
Increased focus on improving commercial activities, strategic portfolio management, and continued strong per diem growth are likely to have strengthened yields in the fiscal third quarter. The company anticipates fiscal third-quarter net yields to rise 8% (constant-currency basis) from 2023 levels.
A strong pricing environment across itineraries is likely to have aided the company’s performance in the to-be-reported quarter. For the third quarter of fiscal 2024, it expects adjusted EBITDA to increase 20% year over year to $2.7 billion.
However, high costs are likely to have hurt the company’s bottom line. For third-quarter fiscal 2024, CCL expects adjusted cruise costs, excluding fuel per ALBD (in constant currency), to increase approximately 4.5% year over year. Per our model, total operating expenses in the fiscal third quarter are anticipated to rise 8.9% year over year to $5.7 billion.
CCL Stock’s Price Performance & Valuation
Shares of Carnival have gained 14.3% in the past six-month period compared with the Zacks Leisure and Recreation Services industry’s rise of 4.9%. Although the company outperformed Norwegian Cruise Line Holdings Ltd.’s (NCLH - Free Report) growth of 0.7% in the same time frame, it is lagging behind the Royal Caribbean Cruises Ltd. (RCL - Free Report) and OneSpaWorld Holdings Limited's (OSW - Free Report) return of 31.5% and 21.7%, respectively.
6 Months Price Return Performance
Image Source: Zacks Investment Research
From a valuation perspective, CCL is trading relatively cheap. The company has a forward 12-month price-to-earnings of 12.52X, below the industry average of 16.94X. The company has a Value Score of A.
Image Source: Zacks Investment Research
Investment Considerations for CCL Stock
Carnival's booking trends remain strong, with continued pricing strength for the third and fourth quarters, and a record level of future bookings for 2025, showcasing robust demand. Carnival is also benefiting from new ship deliveries, such as Cunard’s Queen Anne and the Sun Princess, both of which have driven significant yield improvements.
The company's expansion plans include the Celebration Key destination, set to launch in 2025, which is expected to contribute to revenue growth and operational efficiency. Carnival's financial performance has been further supported by its aggressive debt management strategy, including refinancing and deleveraging efforts that have reduced interest expenses. The strong liquidity position has enabled the company to prepay $1.6 billion in debt, reducing net interest expenses for 2024 and beyond. Overall, Carnival is on track to achieve its long-term targets, including double-digit ROIC and reductions in carbon intensity, setting the stage for continued growth and value creation for shareholders.
Wait for the Right Time to Buy CCL
Although Carnival has showcased strong financial performance, robust booking trends and strategic initiatives such as new ship deliveries and debt management, potential investors should proceed with caution. The stock offers long-term growth opportunities, supported by its attractive valuation and future expansion plans, including new destinations like Celebration Key. However, rising costs and broader industry challenges may weigh on short-term margins, making the timing of entry critical. Existing investors may consider holding the stock, but new investors might want to wait for more clarity on cost management and overall market conditions before buying.
Image: Bigstock
Carnival Pre-Q3 Earnings Analysis: Should You Buy, Sell or Hold?
Carnival Corporation & plc (CCL - Free Report) is scheduled to release third-quarter fiscal 2024 results on Sept. 30, 2024.
In the second quarter of fiscal 2024, Carnival reported stellar performance, with earnings per share (EPS) of 11 cents, beating the Zacks Consensus Estimate by 1200%. The reported figure also increased from the year-ago period’s loss of 31 cents per share. Revenues of $5.8 billion, slightly came ahead of the consensus mark of $5.7 billion and increased 17.7% on a year-over-year basis. Sustained demand strength and increased booking volumes primarily drove the company’s performance.
How Are Estimates Placed for CCL?
The Zacks Consensus Estimate for CCL’s fiscal third-quarter EPS is pegged at $1.16, suggesting 34.9% growth from 86 cents reported in the prior-year quarter. The consensus mark has increased by 0.9% in the past 30 days.
The consensus estimate for revenues is pegged at $7.8 billion, suggesting a 14% rise from the year-ago quarter's reported figure.
CCL’s Earnings Surprise History
CCL has an impressive track record of surpassing earnings expectations, exceeding the consensus mark in each of the trailing four quarters. The average surprise over this period is 320.4%, as shown in the chart below.
Image Source: Zacks Investment Research
Q3 Earnings Whispers
Our proven model predicts a likely earnings beat for Carnival this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: Carnival has an Earnings ESP of +0.40%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company sports a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors to Influence CCL’s Q3 Results
Carnival’s fiscal third-quarter performance is likely to have benefited from sustained demand strength, fleet-optimization efforts and new ship additions. This and strength in customer deposits, strong bookings and solid onboard spending are likely to have driven incremental revenue growth in the fiscal third quarter.
Our model estimates fiscal third-quarter passenger ticket revenues to rise 7.2% year over year to $4.9 billion. We expect onboard and other revenues to increase 22% year over year to $2.8 billion.
Increased focus on improving commercial activities, strategic portfolio management, and continued strong per diem growth are likely to have strengthened yields in the fiscal third quarter. The company anticipates fiscal third-quarter net yields to rise 8% (constant-currency basis) from 2023 levels.
A strong pricing environment across itineraries is likely to have aided the company’s performance in the to-be-reported quarter. For the third quarter of fiscal 2024, it expects adjusted EBITDA to increase 20% year over year to $2.7 billion.
However, high costs are likely to have hurt the company’s bottom line. For third-quarter fiscal 2024, CCL expects adjusted cruise costs, excluding fuel per ALBD (in constant currency), to increase approximately 4.5% year over year. Per our model, total operating expenses in the fiscal third quarter are anticipated to rise 8.9% year over year to $5.7 billion.
CCL Stock’s Price Performance & Valuation
Shares of Carnival have gained 14.3% in the past six-month period compared with the Zacks Leisure and Recreation Services industry’s rise of 4.9%. Although the company outperformed Norwegian Cruise Line Holdings Ltd.’s (NCLH - Free Report) growth of 0.7% in the same time frame, it is lagging behind the Royal Caribbean Cruises Ltd. (RCL - Free Report) and OneSpaWorld Holdings Limited's (OSW - Free Report) return of 31.5% and 21.7%, respectively.
6 Months Price Return Performance
Image Source: Zacks Investment Research
From a valuation perspective, CCL is trading relatively cheap. The company has a forward 12-month price-to-earnings of 12.52X, below the industry average of 16.94X. The company has a Value Score of A.
Image Source: Zacks Investment Research
Investment Considerations for CCL Stock
Carnival's booking trends remain strong, with continued pricing strength for the third and fourth quarters, and a record level of future bookings for 2025, showcasing robust demand. Carnival is also benefiting from new ship deliveries, such as Cunard’s Queen Anne and the Sun Princess, both of which have driven significant yield improvements.
The company's expansion plans include the Celebration Key destination, set to launch in 2025, which is expected to contribute to revenue growth and operational efficiency. Carnival's financial performance has been further supported by its aggressive debt management strategy, including refinancing and deleveraging efforts that have reduced interest expenses. The strong liquidity position has enabled the company to prepay $1.6 billion in debt, reducing net interest expenses for 2024 and beyond. Overall, Carnival is on track to achieve its long-term targets, including double-digit ROIC and reductions in carbon intensity, setting the stage for continued growth and value creation for shareholders.
Wait for the Right Time to Buy CCL
Although Carnival has showcased strong financial performance, robust booking trends and strategic initiatives such as new ship deliveries and debt management, potential investors should proceed with caution. The stock offers long-term growth opportunities, supported by its attractive valuation and future expansion plans, including new destinations like Celebration Key. However, rising costs and broader industry challenges may weigh on short-term margins, making the timing of entry critical. Existing investors may consider holding the stock, but new investors might want to wait for more clarity on cost management and overall market conditions before buying.
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