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Carnival Corp CCL

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Morningstar’s Analysis

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Economic Moat




Carnival Offers Third-Quarter Update; Bookings Imply Interest in Travel; Shares Modestly Undervalued

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

No-moat Carnival printed preliminary third-quarter results that included a $1.7 billion adjusted net loss, in line with the $1.76 billion loss we had forecast. With the entire fleet offline in the period, there is little anticipated by way of revenue, a factor we expect to improve incrementally in the fourth quarter, with two Costa ships set for sailings by Sept. 19 and Aida teed up for deployment in the autumn. This pause in operation has given Carnival the opportunity to prune its fleet, and the firm now expects 18 ships to exit the fleet (12% of capacity) over the near term. These 18 ships accounted for just 3% of operating income in 2019, leaving Carnival with a fleet that could generate a richer EBITDA margin mix once sailings resume in earnest. Given limited financial detail and our forecast proximity to net income, we don’t plan to alter our $20 (GBX 1,600) fair value estimate and will re-evaluate the intrinsic value when full financial statements are disclosed at the end of September.

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Company Profile

Business Description

Carnival is the largest global cruise company, with more than 100 ships on the seas at the end of 2019. 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.

3655 North West 87th Avenue
Miami, FL, 33178-2428, Panama
T +1 305 599-2600
Sector Consumer Cyclical
Industry Travel Services
Most Recent Earnings May 31, 2020
Fiscal Year End Nov 30, 2020
Stock Type
Employees 106,000