Cruise line giant Carnival Corp. beat estimates with its first quarterly profit since the pandemic early Friday. CCL stock tumbled Friday after rising in volatile early trade.
Earnings
Carnival reported adjusted earnings of 86 cents per share, compared to a loss of 58 cents per share last year. Revenues leapt 59% to an all-time record $6.85 billion. Carnival recorded $6.53 billion in revenue for Q3 2019, prior to the pandemic.
Analysts polled by FactSet expected Carnival earnings of 76 cents per share adjusted on a 55.8% sales spike to $6.7 billion.
Total bookings hit a Q3 record of $6.3 billion, surpassing the previous record of $4.9 billion from 2019 by 28%.
Carnival's occupancy rate returned to "historical levels" and improved to 109% from 84.2% last year. Analysts expected an occupancy rate of 107.4% for the quarter.
"The outperformance was driven by strength in demand, with both our North America and Australia segment and Europe segment equally outperforming across expectations," CEO Josh Weinstein said in the release. Weinstein noted North American bookings are exceeding historical highs and European brands achieved its pre-pandemic levels.
"Our booked position for 2024 is further out than we have ever seen and at strong prices," Weinstein said.
The company expects to report an adjusted loss of 18 cents to 10 cents per share for Q4. For the fiscal year, Carnival forecasts an adjusted loss of 4-12 cents a share.
Carnival guided fiscal 2023 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) between $4.1 billion to $4.2 billion, which includes a $125 million hit due to fuel prices. Net per diems are seen up 7% on a constant currency basis compared to 2019.
Carnival expects full-year occupancy of 100% or higher.
CCL Stock
CCL stock spiked as high as 15.24 in the morning, before falling 5% to 13.72 by market close. Shares rose 1.6% to 13.98 Wednesday.
Carnival stock is down about 22% on the quarter after hitting a 2023 high of 19.55 on July 5, its highest level since April 2022. The stock rallied 70% so far this year.
Shares fell below their 50-day moving average in mid-August and are trading below their 10-day and 21-day lines.
Cruise Rally
Cruise lines sailed higher in the first half of the year, driven by a wave of bookings as consumers cut loose long-awaited vacations after pandemic lockdowns were lifted in 2022.
Royal Caribbean Group hit a three-year high in late July after trouncing Q2 estimates and hoisting its full-year earnings outlook by 33%. Norwegian Cruise Line posted its first positive earnings since Q4 2019 for its second-quarter results in August. However, NCLH stock fell after results as the company's Q3 outlook came in below Wall Street estimates.
Despite pulling back from 2023 highs in July, Royal Caribbean and Carnival are still among the top performers in the S&P 500 this year.
Royal Caribbean stock soared nearly 86% in 2023 while CCL stock spiked roughly 70%. Norwegian Cruise Line shares tumbled nearly 23% this quarter but are up 34% in 2023.
Analyst Outlooks
Barclays lowered its price target on Carnival stock to $21 from $22 last Thursday but maintained an overweight rating on shares. The firm expects "solid" Q3 results with an upbeat outlook on demand and bookings. But Barclays sees fuel and currency pressures weighing on Carnival's Q4 guidance.
Although leisure demand might be slowing, Carnival and its peers remain healthy due to its longer booking curve and more-involved planning process, Susquehanna wrote in a Sept. 21 research note. Onboard spending trends and pre-cruise package sales will be key indicators to watch, according to the firm. Susquehanna maintained a positive rating and $17 price target for CCL stock.
Redburn Atlantic upgraded Carnival and Norwegian Cruise Line to buy from neutral on Sept. 14. The firm raised its price target on CCL stock to $23, implying a potential 64% jump. Redburn hoisted its target on NCLH stock to $25, forecasting shares could rally 53% from current levels.
"Today, the sector has exited intensive care, and the fundamental investment case, of strong secular growth and margin opportunity, is clear," analyst Alex Brignall wrote. He expects baby boomers and retirees to fuel much of the upcoming demand.
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