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Carnival PLC ADR CUK

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Morningstar’s Analysis

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Higher Start Up Costs Mute Improving Fundamentals at Carnival; Shares Fairly Valued

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

No-moat Carnival’s third-quarter update was worse than our forecast, with an adjusted $2 billion loss in the period, versus our $1.2 billion loss outlook. While this shortfall impacts our fair value estimate, we don’t think the demand outlook presents a risk to the long-term fundamentals of the business. In fact, guidance for 2023 EBITDA that surpasses 2019 levels was better than our flat 2023 EBITDA forecast, which should allow us to bump our earnings power in that year. We believe Carnival has offered convincing rhetoric that such improvement is achievable, citing the addition of more efficient ships (both the divestiture of older ships and the addition of ships with improved unit and fuel costs), the end of startup costs for ship redeployment, and upside from cost savings initiatives.

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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.

Carnival House, 100 Harbour Parade
Southampton, Hampshire, SO15 1ST, United Kingdom
T +44 2380655000
Sector Consumer Cyclical
Industry Leisure
Most Recent Earnings Aug 31, 2021
Fiscal Year End Nov 30, 2021
Stock Type
Employees 71,000