ii view: Carnival offers strong 2025 optimism

Full-year results to 31 December

• Revenue up 16% to $25 billion
• Adjust profit (EBITDA) up 41% to $6.1 billion

Guidance:

• Expects full year 2025 adjusted profit (EBITDA) of $6.6 billion

Chief executive Josh Weinstein said:

"This has been an incredibly strong finish to a record year. The progress was broad based as we drove strong pricing in 2024 as compared to 2023 across our major cruise lines and trades."

“2025 is shaping up to be another banner year, with yield growth expected to far outpace historical growth rates and again exceed unit cost growth, thanks to the efforts of our amazing team members. They have delivered a step-change improvement in 2024 which sets us up for a fantastic 2025 and beyond, while delivering unforgettable happiness to over 13.5 million guests last year.”

• Invest with ii: What is a Managed ISA? | Open a Managed ISA | Transfer an ISA

ii round-up:

Cruise ship operator Carnival (LSE:CCL) detailed record annual revenues pushed by passenger numbers of 13.5 million, up from 12.5 million in 2023, strong pricing. 

Full year 2024 revenues climbed 16% year-over-year to $25 billion, aiding a 41% gain in adjust profits (EBITDA) to $6.1 billion. Cumulative advanced bookings for the year ahead sit at a record high for both price paid and occupancy with management predicting an 8% improvement in 2025 adjusted profit to $6.6 billion. 

Shares for the FTSE 250 and S&P 500 company gain 3% in post results trading having come into this latest news up by more than 40% year-to-date. That’s way ahead of a 16% fall for shares of smaller rival Saga (LSE:SAGA). The FTSE 250 is up 3% during 2024. The S&P 500 is up 24%.  

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.

Total customer deposits reached a fourth quarter record of $6.8 billion, surpassing the previous fourth quarter record of $6.4 billion.

Carnival expects adjusted profit (EBITDA) per available lower berth for the 2025 year ahead to be the highest in almost two decades.

Strong cash generation is continuing to assist in reducing debt. Carnival’s net debt to adjusted profit (EBITDA) ratio stands at 4.3 times, down from over 6 times in 2023. Both Moody’s and S&P previously upgraded their credit ratings.

ii view:

Began 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. North America generates its biggest slice of revenues at around 60%, followed by Europe at 30% and Australia and Asia the balance. 

For investors, the many factors outside of management’s control which can impact performance, such as wars, the weather and pandemics, should not be forgotten. Net debt remains elevated, due to the Covid crisis, fuel costs and currency movements regularly hinder profits, while heightened debt continues to leave the dividend payment suspended. 

• Key reasons S&P 500 will surge another 10% in 2025
• Golden returns in 2024: but is it now too late to profit?
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

More favourably, 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 are still being attacked, while diversity of both brands and geographical operations is not to be overlooked. 

In all, positive trading momentum supports continued longer-term hope. That said, heightened global geopolitical tensions continue to underline the required higher risk appetite needed in taking any investment interest. 

Positives: 

• Diversity of brands and geographical locations
• Focus on costs

Negatives:

• Uncertain economic outlook
• Dividend suspended

The average rating of stock market analysts:

Buy