ii view: Carnival cruises to revenue record

Third-quarter results to 30 September

• Revenue up 15% to $7.89 billion
• Adjusted earnings up 59% to $1.26 per share

Guidance:

• Now expects full-year adjusted profit of $6 billion, up from a previous $5.8 billion

Chief executive Josh Weinstein said:

"We delivered a phenomenal third quarter, breaking operational records and outperforming across the board.

"Looking forward, the momentum continues as our enhanced commercial execution drives demand well in excess of our capacity growth, leaving us well positioned with an even stronger base of business for 2025, a record start to 2026."

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ii round-up:

Carnival (LSE:CCL) detailed record quarterly revenue alongside profit that beat Wall Street forecasts, with the cruise ship operator also raising its full-year estimates for a third time.

Third-quarter revenue climbed 15% year-over-year to a record of $7.89 billion, driving adjusted earnings up 59% to $1.26 per share. That exceeded analyst forecasts of $1.17 per share. Carnival now expects adjusted 2024 profit (EBITDA) of around $6 billion, up more than 40% on 2023. 

Shares in the FTSE 250 and S&P 500 company fell 2% in post results US trading having come into this latest news up by around a quarter over the last year. That’s similar to fellow holiday and cruise ship operator TUI AG (XETRA:TUI1). The FTSE 250 is up 15% over the last year and the S&P 500 up 34%.  

Operating ships across brands including Costa, Cunard, P&O and Carnival itself, the company is the only one to be included in both the S&P 500 index in the US and the FTSE 250 index in the UK.

Strong customer demand and cost savings have helped drive the sales and profit performance year-to-date. Cumulative advanced bookings for the full year 2025 are ahead of this time last year, with ticket prices also up. 

Strong cash generation is continuing to assist in reducing debt. Carnival’s net debt-to-EBITDA ratio is expected to come in at around 4.5 times by the end of 2024. Both Moody’s and S&P have recently upgraded their credit ratings.

Fourth-quarter and full-year results are likely to be announced mid-December. 

ii view:

Started in 1972 with just one second-hand ship, Carnival today operates around 90 ships across various brands and also including Aida, Holland America Line, Princess Cruises and Seabourn. In 2023, North America generated its biggest slug of sales at 61%, followed by Europe at 30% and Australia and Asia the balance of around 9%. 

For investors, the many factors outside of management’s control which can impact performance, such as wars, the weather and pandemics, cannot be forgotten. Net debt remains elevated due to the Covid crisis. Fuel costs and currency movements regularly affect profits, while elevated net debt means the dividend remains suspended. 

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To the upside, trends such as ageing populations and the desire for multi destination holidays arguably work in its favour. A focus on reducing group debt persists. Costs remain a focus, while diversity of both brands and geographical operations is not to be overlooked. 

On balance, favourable trading momentum and a consensus analyst fair value estimate above £15 per share offer positives. That said, heightened geopolitical tensions, particularly in the Middle East, continue to underline the higher risk appetite needed to invest in this sector. 

Positives: 

• Diversity of brands and geographical locations
• Focus on costs

Negatives:

• Uncertain economic outlook
• Dividend suspended

The average rating of stock market analysts:

Cautious buy