On March 27, 2024, Carnival Corporation & plc (CCL), the world’s largest cruise operator, announced its robust start to the fiscal year in its 8-K filing. First-quarter revenues surged to a record $5.41 billion, marking a 22% year-over-year increase, while adjusted EBITDA soared by 128% to $871 million.

Nevertheless, the company noted an adjusted net loss and adjusted loss per share of $180 million and $0.14 for the quarter. Additionally, as of February 29, 2024, CCL’s cash and cash equivalents amounted to $2.24 billion, down from $2.42 billion as of November 20, 2023.

Besides, the fall down of Francis Scott Key Bridge on March 26 due to a collision with a container ship has stopped all ships from moving into a port on which CCL depends heavily. The sad event might bring about a possible loss of $10 million for the cruise line operator this year.

Additionally, CCL has recently declared it will not sail through the Red Sea because of ongoing conflicts. CFO David Bernstein stated, “We decided that it was time to recognize the fact that we probably won’t be sailing there, and perhaps for the rest of this year and perhaps early in 2025 as well.”

Rerouting itineraries affected by the conflict with the Houthi incurred a $130 million expense. Shares of CCL have gained 23% over the past six months and 95.6% over the past year to close the last trading session at $17.19.

Here are the fundamental aspects of CCL that could influence its price performance in the near term:

Mixed Historical Growth

Over the past three years, CCL’s revenue increased at a CAGR of 56.9%. However, its tangible book value and total assets declined at respective CAGRs of 34.9% and 2.9% over the same time frame.

Optimistic Analyst Estimates

The consensus revenue estimate of $25.81 billion for the fiscal year ending November 2025 reflects a 4.6% year-over-year improvement. Moreover, the consensus EPS estimate of $1.38 for the same period exhibits a 41.4% rise from the prior year. Furthermore, the company topped the consensus revenue and EPS estimates in all four trailing quarters.

Robust Profitability

The stock’s trailing-12-month gross profit margin and EBITDA margin of 49.56% and 19.98% are 38% and 83.6% higher than the industry averages of 35.91% and 10.88%, respectively. Moreover, the company’s trailing-12-month CAPEX/Sales of 15.21% is 396.3% higher than the industry average of 3.06%.

Mixed Valuation

In terms of forward EV/EBITDA, CCL is trading at 9.02x, 6.2% lower than the industry average of 9.61x. Its forward Price/Sales is 0.87x, 5% lower than the industry average of 0.92x.

However, the stock’s forward non-GAAP P/E and forward EV/Sales of 17.08x and 2.06x are 9.8% and 66.7% higher than the respective industry averages of 15.55x and 1.24x.

POWR Ratings Exhibit Mixed Prospects

CCL’s stance is apparent in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. CCL has a C grade in Value, which matches its mixed valuation. Yet, the stock also received a D grade for Stability, corresponding with its 24-month beta of 2.21.

CCL has topped the 4-stock Travel – Cruises industry. Click here to access CCL’s Growth, Momentum, Sentiment, and Quality ratings.

Bottom Line

By redeeming its remaining second lien debt and expanding the forward starting revolving facility with $400 million, CCL has implemented strategic initiatives to strengthen its financial situation. The company also simplified its capital structure by prepaying a euro-term loan, lowering interest costs.

Even if these progressions could improve the company’s prospects, as seen in optimistic predictions from analysts, the present financial status, considerable instability, and mixed valuation might advise caution in holding back on entering the stock until a better moment comes.

How Does Carnival Corporation & plc (CCL) Stack Up Against Its Peers?

While CCL has an overall grade of C, equating to a Neutral rating, you may check out these B (Buy) rated stocks within the Travel – Hotels/Resorts industry: Genting Berhad (GEBHY), Genting Malaysia Berhad (GMALY) and Playa Hotels & Resorts N.V. (PLYA). To explore more Travel – Hotels/Resorts stocks, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

CCL shares fell $0.01 (-0.06%) in premarket trading Thursday. Year-to-date, CCL has declined -7.28%, versus a 10.41% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...

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