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Carnival PLC ADR CUK Stock Quote

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Dismal Third Quarter Sinks Carnival Shares; Investors Must Wait Until 2023 for Profit Improvement

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

No-moat Carnival reported worse-than-expected fiscal third-quarter results, delivering adjusted EBITDA of just $300 million, well below the more than $1 billion we had forecast. Although 95% of the fleet was deployed and occupancy was 84%, Carnival remained plagued by higher costs related to COVID-19 protocols and near-term pricing pressures as it continues to book a higher proportion of close-in itineraries and digest future cruise credits. Moreover, the firm’s fourth-quarter outlook for around breakeven EBITDA is significantly lower than the $570 million we had forecast. We believe the slower trajectory to restored profitability is the primary culprit behind the shares tumbling nearly 20% on the day of the release. However, we think concerns about a return to consistent profitability should alleviate in 2023, given that cumulative advance bookings and pricing (normalized for FCCs) are already above 2019 levels. This should permit our 2023 EBITDA outlook to approach 2019 (prepandemic) levels again.

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Company Profile CUK

Business Description

Carnival is the largest global cruise company, with 91 ships in its fleet at the end of fiscal 2021. All of its capacity is set to be redeployed in 2022. 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.

Carnival House, 100 Harbour Parade
Southampton, Hampshire, S015 1ST, United Kingdom
T +44 2380655000
Industry Leisure
Most Recent Earnings Aug 31, 2022
Fiscal Year End Nov 30, 2022
Employees 18,701

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