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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

Carnival's Q2 Loss Worse Than Expected, but Deployment Visibility Buoys Cash Flow Hopes

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

We don’t plan any material change to our $24 per share (GBX 1,740) fair value estimate for no-moat Carnival after its second-quarter update. While the period’s adjusted net loss of $2 billion was wider than the $1.2 billion loss we had forecast as restart costs began to build, the confirmed deployment of 27 ships in the third quarter (35% of capacity) and another 15 ships in the fourth quarter (20%) indicate that more than 50% of the firm’s berths should be sailing by the end of fiscal 2021. We remain cautiously optimistic that this cadence of deployment is achievable if the global vaccine rollout expands consistently. However, we’d caution investors to wait for a wider margin of safety to take a sail in shares given the still high uncertainty in near-term cash flows as Carnival burns cash to redeploy its fleet.

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Company Profile

Business Description

Carnival is the largest global cruise company, set to deploy 52 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 May 31, 2021
Fiscal Year End Nov 30, 2021
Stock Type
Employees 70,000

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