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Here's How Carnival (CCL) Stock Has Outrun Its Peers in a Month

Carnival Corporation & plc CCL is riding high on solid bookings, fleet expansion, EBITDA growth and strategic initiatives. Consequently, the stock has gained 18.8% in the past month compared with the industry’s increase of 1.6%.

CCL’s sales and earnings in 2023 is likely to witness growth of 72.8% and 93.8% year over year, respectively. However, rising fuel prices and geopolitical tensions are concerns.

Let’s delve deeper.

Catalyst Driving Growth

Carnival is benefiting from robust bookings. The North America and Australia (NAA), and Europe segments reported solid bookings in fiscal first quarter. The upside was backed by strong demand, bundled package offerings and pre-cruise sales. Also, it witnessed benefits from increased advertising activities.

During first quarter, CCL's NAA bookings curve mirrored peak 2019 levels, while the European recovery trajectory was more than 80% from the same level. It stated that its 2023 cumulative advanced booked position is at increased prices compared with 2019 levels.

Meanwhile, as of Feb 28, total customer deposits were $5.7 billion compared with $5.1 billion reported in the previous quarter. The amount was higher than $4.9 billion reported in 2019.

Fleet expansion continues to drive the company’s growth. Throughout 2022, Carnival delivered new flagships for five of its brands, including Carnival Celebration, AIDAcosma, Costa Toscana, Discovery Princess and Seabourn Venture. All of these ships were purpose-built to generate higher returns.

In fiscal 2023, CCL anticipates delivery of the Seabourn luxury expedition ship. Also, it emphasized a pipeline of four ships to be delivered through 2025.

On the other hand, Carnival is the largest and historically, the most profitable cruise operator in the world. Its cruise brands are well diversified across diverse geographies, including Asia and Europe. Also, these are strategically positioned at various price points within the larger North American cruise market.

This enables CCL to cater to passengers in various geographic regions as well as within the contemporary, premium and luxury cruise segments. With the strength and diversity of its brands and itineraries, Carnival boasts a broader passenger base among potential and repeat cruise vacationers.

The Zacks Rank #3 (Hold) company is benefiting from robust EBITDA growth. Adjusted EBITDA, during first-quarter fiscal 2023, was $382 million against ($962) million reported in the prior-year quarter. It anticipates adjusted EBITDA (per ALBD) to reach two-thirds of 2019 levels in second-quarter 2023 and sequential quarterly improvement through 2023.

Attributes such as continuing demand generation, a pullback on promotions and opaque channels (to drive meaningful ticket price improvement), more market openings (for cruise travel) and relaxed protocols are likely to add to the upside. For second-quarter fiscal 2023, CCL anticipates adjusted EBITDA in the range of $600-$700 million.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Concerns

Carnival’s operations are likely to be impacted by uncertainty stemming from the Russia-Ukraine war. Geopolitical developments have also pushed fuel curves higher. CCL revealed that tension between Russia and Ukraine has been impacting the European markets. Management anticipates the close-end nature of deployment change and its inability to find alternatives for itineraries to disrupt booking patterns for some time.

Key Picks

Some better-ranked stocks in the Zacks Consumer Discretionary sector are Royal Caribbean Cruises RCL, Bluegreen Vacations Holding Corporation BVH and Crocs, Inc. CROX. While RCL and BVH flaunt a Zacks Rank #1 (Strong Buy), CROX carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Royal Caribbean Cruises has a trailing four-quarter earnings surprise of 28.1%, on average. The stock has gained 40.2% in the past year.

The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates rises of 20.4% and 42.9%, respectively, from the year-ago period’s levels.   

Bluegreen Vacations has a trailing four-quarter earnings surprise of 24.7%, on average. The stock has increased 30.2% in the past six months.  

The Zacks Consensus Estimate for BVH’s 2023 sales and EPS indicates increases of 3.6% and 17.6%, respectively, from the year-ago levels.  

Crocs has a trailing four-quarter earnings surprise of 19.6%, on average. The stock has surged 83.1% in the past year.

The Zacks Consensus Estimate for CROX’s 2023 sales and EPS indicates improvements of 13.2% and 5.7%, respectively, from the year-ago period’s levels.

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