Yahoo Finance Strong Booking Trends Aid Carnival (CCL) Amid High Costs
Carnival Corporation & plc CCL is benefiting from the solid booked position for the remainder of the year, with significantly higher pricing and occupancy. Also, the focus on marketing campaigns, fleet-optimization efforts and fleet expansion initiatives bode well.
Shares of the company have gained 13.9% in the past three months, compared with the industry’s increase of 1.7%. However, increased cruise costs and geopolitical uncertainties are concerns
This Zacks Rank #3 (Hold) company’s earnings estimates for fiscal 2024 have increased to $1.05 per share from $1.02 in the past 30 days. The positive trend signifies bullish analysts’ sentiments, robust fundamentals and prospects of further outperformance in the near term.
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The upside is supported by its solid VGM Score of A, contributed by a Value, Growth and Momentum Score of A. Meanwhile, CCL’s superior return on equity (ROE) is indicative of its growth potential. The company’s ROE stands at 15.2% compared with the industry’s 6.8%. This indicates efficiency in using its shareholders’ funds.
Let us discuss the factors highlighting why investors should retain the stock for now.
Growth Catalysts
Strong Booking Trends: The company benefited from a solid booking trend. The company reported strong booking momentum for 2025, with record volumes surpassing 2024 levels in price and occupancy., the company reported higher pricing on bookings due to limited remaining inventory for 2024. It reported 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. The company's 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.
As of May 31, 2024, total customer deposits amounted to $8.3 billion, compared with $7 billion reported in the previous quarter, exceeding the $7.2 billion reported on May 31, 2023. CCL expects to maintain mid-single-digit per diem growth through the rest of the year, marking eight consecutive quarters of these improvements. The company's focus on optimizing the yield curve is likely to benefit in future periods.
Fleet Optimization Initiative: The company continues to manage its portfolio to improve operations actively. Early next year, CCL plans to phase out the P&O Cruises Australia brand, selling the 28-year-old Pacific Explorer and transferring two remaining vessels to Carnival Cruise Line. Despite this change, CCL will maintain a leading presence in the Australian market, serving more than 60% of all Aussie Cruisers. This market is strategically valuable due to its alignment with the Northern Hemisphere winter, allowing CCL's seasonal ships to operate efficiently across two summer periods. Consolidating into Carnival Cruise Line will streamline operations and flexibility, supporting growth with nine new ships added since 2019, including three from Costa Cruises.
With two Excel-class ships slated for delivery in 2027 and 2028, Carnival Cruise Line's capacity is expected to grow by about 50% compared to 2019 levels. By 2028, the Carnival brand will represent 37% of the company's portfolio, up from 29%, reflecting ongoing efforts to maximize return on invested capital (ROIC) through portfolio optimization.
Focus on Fleet Expansion Bodes Well: 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. 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 new ships contributed to the strong yield improvement in the quarter, CCL also witnessed strong double-digit growth in existing fleet yields.
Cost Saving Efforts: During the fiscal second quarter, the company identified some cost savings that improved its full-year June guidance. Adjusted cruise costs, excluding fuel per ALBD in constant currency, were consistent with the previous year and exceeded March's guidance, partly due to cost savings and mainly driven by timing differences in expenses between quarters.
Concerns
The company has been witnessing labor challenges in a handful of markets. During the fiscal second quarter, cruise and tour operating expenses increased 9.9% year over year to $3.8 billion. Several factors drove this uptick — elevated commissions, transportation costs and other expenses linked to higher ticket pricing and higher onboard and other cost of sales. For third-quarter fiscal 2024, it expects adjusted cruise costs, excluding fuel per ALBD (in constant currency), to increase approximately 4.5% year over year.
Key Picks
Here are some better-ranked stocks from the Consumer Discretionary sector.
Royal Caribbean Cruises Ltd. RCL currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
RCL has a trailing four-quarter earnings surprise of 18.3%, on average. The stock has gained 57.7% in the past year. The Zacks Consensus Estimate for RCL’s 2024 sales and EPS implies growth of 16.9% and 64%, respectively, from the year-ago levels.
PlayAGS, Inc. AGS presently sports a Zacks Rank of 1. AGS has a trailing four-quarter earnings surprise of 33.3%, on average. The stock has gained 103.4% in the past year.
The consensus estimate for AGS’s 2024 sales and EPS suggests growth of 6.5% and 3,000%, respectively, from year-ago levels.
Adtalem Global Education Inc. ATGE currently sports a Zacks Rank of 1. ATGE has a trailing four-quarter earnings surprise of 18.8%, on average. The stock has surged 91.5% in the past year.
The Zacks Consensus Estimate for ATGE’s fiscal 2025 sales and EPS indicates an increase of 5.3% and 16.6%, respectively, from year-ago levels.
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Carnival Corporation (CCL): Free Stock Analysis Report
Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report
Adtalem Global Education Inc. (ATGE): Free Stock Analysis Report
PlayAGS, Inc. (AGS): Free Stock Analysis Report
