CCL Stock Sails 74% In 2023 On Travel Rebound. Will Carnival Turn Around Its Earnings Slump?

Cruise line giant Carnival Corp. (CCL) announces Q3 earnings early Friday. Analysts expect Carnival to post its first positive earnings since Q1 2020. CCL stock is up nearly 74% this year despite falling more than 28% from its early July highs.




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Cruise lines sailed higher in the first half of the year, driven by a wave of bookings as consumers cut loose long-awaited vacations after pandemic lockdowns were lifted in 2022.

Royal Caribbean Group (RCL) hit a three-year high in late July after trouncing Q2 estimates and hoisting its full-year earnings outlook by 33%. Norwegian Cruise Line (NCLH) posted its first positive earnings since Q4 2019 for its second-quarter results in August. However, NCLH stock fell after results as the company’s Q3 outlook came in below Wall Street estimates.

Meanwhile, Carnival expects to return to profitability in the second half of fiscal 2023 while it works to pay down its debt, Carnival CFO David Bernstein noted in its Q2 earnings release.

Despite pulling back from 2023 highs in July, Royal Caribbean and Carnival are still among the top performers in the S&P 500 this year.

Royal Caribbean stock soared nearly 86% in 2023 while CCL stock spiked roughly 74%. Norwegian Cruise Line shares tumbled nearly 27% this quarter but are up 33% in 2023.

However, some analysts expect surging fuel prices to weigh on results.

Analyst Outlooks

Barclays lowered its price target on Carnival stock to $21 from $22 last Thursday but maintained an overweight rating on shares. The firm expects “solid” Q3 results with an upbeat outlook on demand and bookings. But Barclays sees fuel and currency pressures weighing on Carnival’s Q4 guidance.

Although leisure demand might be slowing, Carnival and its peers remain healthy due to its longer booking curve and more-involved planning process, Susquehanna wrote in a Sept. 21 research note. Onboard spending trends and pre-cruise package sales will be key indicators to watch, according to the firm. Susquehanna maintained a positive rating and $17 price target for CCL stock.

Redburn Atlantic upgraded Carnival and Norwegian Cruise Line to buy from neutral on Sept. 14. The firm raised its price target on CCL stock to $23, implying a potential 64% jump. Redburn hoisted its target on NCLH stock to $25, forecasting shares could rally 53% from current levels.

“Today, the sector has exited intensive care, and the fundamental investment case, of strong secular growth and margin opportunity, is clear,” analyst Alex Brignall wrote. He expects baby boomers and retirees to fuel much of the upcoming demand.

Earnings

Analysts polled by FactSet expect Carnival earnings of 76 cents per share adjusted, compared to a loss of 58 cents per share last year. Wall Street forecasts a 55.8% sales spike to $6.7 billion.

Carnival’s occupancy rate is seen improving to 107.4% from 84.2% last year.

CCL Stock

CCL stock rose 1.6% to 13.98 Wednesday ahead of Friday results.

Carnival stock is down more than 25% on the quarter after hitting a 2023 high of 19.55 on July 5, its highest level since April 2022.

Shares fell below their 50-day moving average in mid-August and are trading below their 10-day and 21-day lines.

You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison

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