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Carnival Corp Shs Paired with 1 sh of beneficial interest from P&O Princess CCL

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Omicron Creates Waves for Carnival, but Should Be Another Storm the Company Sails Through

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

We don’t plan any material change to our $26.50 (GBX 1,940) per-share fair value estimate for no-moat Carnival after digesting fourth-quarter results, which included a $2 billion adjusted loss. This metric was in line with our forecast and matches the magnitude of losses in prior six quarters since the start of the coronavirus pandemic. Shares have remained under pressure since omicron was announced as a variant of concern by the World Health Organization in November, providing a compelling valuation for investors. However, we expect performance to remain inconsistent over the near term given the proliferation of new variants, suggesting investors consider a wide margin of safety. Like prior variants, weak demand surrounding omicron should prove transitory, with Carnival noting that cumulative advanced bookings were at the high-end of historical ranges with pricing for second-half 2022 and the first half of 2023, higher than in 2019 (even including future cruise credits). The willingness of consumers to cruise is also evidenced by customer deposits of $360 million as of Nov. 30, up sequentially, displaying that new interest is attracted to the cruise product.

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Company Profile

Business Description

Carnival is the largest global cruise company, set to deploy 50 ships on the seas by the end of fiscal 2021 as the COVID-19 pandemic wanes. Its portfolio of brands includes Carnival Cruise Lines, Holland America, Princess Cruises, and Seabourn in North America; P&O Cruises and Cunard Line in the United Kingdom; Aida in Germany; Costa Cruises in Southern Europe; and P&O Cruises in Australia. Carnival also owns Holland America Princess Alaska Tours in Alaska and the Canadian Yukon. Carnival's brands attracted about 13 million guests in 2019, prior to COVID-19.

Contact
3655 N.W. 87th Avenue
Miami, FL, 33178-2428
T +1 305 599-2600
Sector Consumer Cyclical
Industry Travel Services
Most Recent Earnings Aug 31, 2021
Fiscal Year End Nov 30, 2021
Stock Type
Employees 70,000

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