Company / Analytics

Analytics, 08 April 2021

Carnival’s earnings and outlook of the industry

Despite the current state of the cruise industry, Carnival’s first-quarter fiscal 2021 earnings provided some cause for celebration. The cruise industry has been severely affected by the COVID-19 pandemic and related travel restrictions. However, the company noted that booking volumes were picking up, suggesting people are eager to travel again.

Carnival earnings

Carnival Corp. is the world’s largest cruise company. The company has been operating with a reduced fleet due to the COVID-19 pandemic even as the global vaccine rollout provides hope for a recovery. While Carnival reported an adjusted net loss of $2.0 billion in Q1 FY 2021 compared to adjusted net income of $150 million in the year-ago quarter, the company noted that booking volumes were picking up, suggesting people are eager to travel again.

“Booking volumes are accelerating. During the first quarter of 2021 they were approximately 90% higher than volumes during the fourth quarter of 2020 reflecting both the significant pent-up demand and long-term potential for cruising,” said CEO Arnold Donald. Booking volumes for full-year FY 2022 are ahead of booking volumes in FY 2019, before the pandemic. He followed this up by saying that the company may move its home ports away from the U.S. if it can’t obey CDC protocols, “…if we’re unable to sail, then obviously we will consider home porting elsewhere.”

Investors were looking for signs that the pandemic’s fallout is easing, and analysts expected the company to report its fourth consecutive quarterly loss and fourth straight quarter of declining revenue.

Investors were also focused on Carnival’s occupancy rate, a measure of the amount of passenger capacity, or rooms, being utilized. The entire cruise industry has suffered from plummeting occupancy rates amid the pandemic. But they may start to rebound as the health risks of the virus begin to subside.

How did Carnival stock move?

Shares of Carnival have dramatically outperformed the broader market over the past year. Some of that outperformance is due to the stock’s rebound from a much deeper plunge than the rest of the market during the pandemic-induced crash that took place early last year. But some of the outperformance, especially since late October, has been fueled by investor optimism about the potential positive impact of COVID-19 vaccines. Vaccines are now being administered to millions of people in the U.S. and globally.

Carnival’s shares have provided a total return of 175.3% over the past 12 months, well above the S&P 500’s total return of 53.1%.

At the time of writing, Carnival stock was trading at $ 29.00, after jumping 4.7% in morning trading Wednesday.

Should you buy Carnival Cruise stock?

The current consensus among 20 polled investment analysts is to hold stock in Carnival Corp. This rating has held steady since March, when it was unchanged from a hold rating, according to CNN Business.

The 16 analysts offering 12-month price forecasts for Carnival Corp have a median target of 25.35, with a high estimate of 36.20 and a low estimate of 10.79. The median estimate represents a -12.58% decrease from the last price of 29.00, according to CNN Business.

Outlook of Carnival and the cruise industry

While Carnival may bring some ships back into service by the end of the year, Chief Executive Officer Arnold Donald says that it is likely to take until 2023 to fully recover. In the near term, Carnival’s cruise operations remain suspended in major regions, including the U.S. and Australia. Carnival announced early this week that it’s canceling all trips from US ports through June 30. Still, the coming months could see smoother sailing: the US Centers for Disease Control and Prevention issued new guidance Monday that ships won’t need to require vaccines to restart cruising, and investors are optimistic, despite there being no firm date for when that might happen.

Here’s what to expect from cruises this year:

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