Josh Weinstein has said it before and he’s going to say it again.
The president and CEO of Carnival (CCL) was speaking to analysts in June after the world’s largest cruise company reported second-quarter earnings.
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Carnival posted record revenue, operating profit and booking levels for the quarter and Weinstein wanted to make sure everyone saw the big picture.
“You have heard me say this before,” he said during the company’s earnings call. “This is not pent-up demand; it is the compounding effect of building increased consideration in our cruise brands over time and improvement in our yield management techniques to translate that demand into higher ticket prices.”
“And it is further evidence of the strength of our consumer,” he added. “Encouragingly, we’re enjoying consistent growth in both repeat guests and new guests, with each segment up 10% this quarter over last year.”
A 20-year veteran of the company, Weinstein took over the top executive spot in August 2022 after playing a critical role in planning Carnival’s response to the Covid-19 pandemic, which bludgeoned the cruise ship industry.
“We have significantly stepped up where we were before the pandemic to where we are now,” Weinstein told analysts.
The cruise ship industry in general appears to be doing well lately.
Analysts are adjusting their price targets for Carnival
Image source: Carnival Corporation.
Carnival CEO: ‘We’re hitting records on top of records’
An estimated 35.7 million people will embark on a cruise by year-end, according to the Cruise Lines International Association. In 2023 some 31.7 million people took cruises, which is double (107%) the cruise volumes in 2019, a prepandemic year.
The association said the cruise industry was expected to grow to nearly 40 million passengers by 2027, or roughly the entire population of Canada.
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Carnival owns cruise ship brands including Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn, Costa Cruises, AIDA Cruises and Cunard.
The company will sunset the P&O Cruises Australia brand in March 2025 and fold the Australia operations into Carnival Cruise Line.
“Of course, we will still retain our leading presence in the Australian market, carrying over 60% of all Aussie cruisers,” Weinstein said. “It is a great market for us, especially since the Australian summer coincides with the Northern Hemisphere winter, enabling our seasonal ships to capitalize on two summer periods.”
And for its 2026/27 season Carnival Cruise Line has opened bookings for a number of new cruises that will sail from popular U.S. ports on both the East and West Coasts.
Carnival posted adjusted earnings of 11 cents per share for the quarter, swinging from a loss of 31 cents a share a year earlier and beating Wall Street’s call for a loss of 1 cent per share.
Revenue increased 17.7% to a second-quarter record of $5.78 billion and topping analysts’ forecast of $5.68 billion.
“We are hitting records on top of previous records, which clearly tells us the strength and demand we have been building is continuing into next year and beyond,” Weinstein said.
Carnival raised its 2024 adjusted net income guidance by $275 million to $1.55 billion, compared with analysts’ forecasts of $1.37 billion.
The company guided analysts to third-quarter adjusted net income up 35% to $1.58 billion, compared with their consensus forecast of $1.54 billion.
Analyst: ‘Carnival still top pick in leisure group’
Analysts expect third-quarter profit to increase 29% to $1.11 per share, while sales are forecast to climb 13% to $7.75 billion.
Carnival shares are up 2.4% year-to-date and nearly 26% from a year earlier.
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The company is scheduled to report third-quarter results on Sept. 30 and analysts adjusted their price targets for Carnival’s stock.
On Sept. 20 Stifel analyst Steven Wieczynski raised the investment firm’s price target on Carnival to $27 from $25 and affirmed a buy rating on the shares, according to The Fly.
The analyst said that he expected Carnival to be positioned to raise its full-year guidance again when it reports earnings.
The shares have rallied recently and likely already incorporate a beat-and-raise quarter, but Stifel still sees upside and “wouldn’t be surprised to see next year’s EPS end up with a two handle when it’s all said and done,” Wieczynski added.
Mizuho analyst Ben Chaiken raised the firm’s price target on Carnival to $25 from $22, while maintaining an outperform rating on the shares.
The analyst said Carnival continued to be its top pick in the leisure group. Chaiken sees upside from lower fuel prices as the company has no hedges and upside from currency moves.
“Amidst the Covid shutdown, CCL sold roughly 20% of its lower-margin fleet, which we believe sets the stage for stronger than expected operating leverage now that CCL is at full occupancy,” Chaiken said.
The analyst also sees upside to Carnival’s core underlying trends from strong yield growth and improving operating leverage. The shares offer a compelling free cash flow and deleveraging opportunity, he added.
“In October, CCL is holding an Investor Day that could provide an opportunity for the company to provide insight into where they stand relative to their longer-term Ebitda/profitability goals,” Chaiken said.
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