Analysts restore price targets on Carnival shares ahead of earnings

Josh Weinstein has said it before and he’ll say it again.

President and CEO of Carnival (CCI) spoke to analysts in June after the world’s largest cruise line reported second-quarter earnings.

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Carnival posted record revenue, operating profit and booking levels for the quarter, and Weinstein wanted to make sure everyone saw the big picture.

“You’ve heard me say this before,” he said during the company’s earnings call. “This is not a repressed request; it is the combined effect of increasing awareness of our cruise brands over time and improving our yield management techniques to translate demand into higher ticket prices.”

“And it’s further proof of the power of our consumer,” he added. “Encouragingly, we are enjoying steady growth in both repeat and new guests, with each segment up 10% this quarter compared to last year.”

A 20-year veteran of the company, Weinstein took over in August 2022 after playing a key role in planning Carnival’s response to the Covid-19 pandemic, which has hit the cruise ship industry.

“We’ve significantly stepped up from where we were before the pandemic to where we are now,” Weinstein told analysts.

The cruise ship industry in general seems to be doing well lately.

Analysts adjust their price targets for Carnival

Image source: Carnival Corporation.

Carnival CEO: “We’re breaking records upon records”

An estimated 35.7 million people will take a cruise by the end of the year, according to the International Cruise Lines Association. In 2023, an estimated 31.7 million people took cruises, which is double (107%) the cruise volumes of 2019, a pre-pandemic year.

The association said the cruise industry is expected to grow to nearly 40 million passengers by 2027, or roughly the entire population of Canada.

Related: Carnival Cruise Line shares a key question about cruise ports

Carnival owns cruise ship brands including Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn, Costa Cruises, AIDA Cruises and Cunard.

The company will shed the P&O Cruises Australia brand in March 2025 and convert its Australian operations to Carnival Cruise Line.

“We will of course continue to maintain our leading presence in the Australian market, carrying more than 60 per cent of all Australian cruisers,” Weinstein said. “It’s a great market for us, especially as the Australian summer coincides with the Northern Hemisphere winter, allowing our seasonal vessels to capitalize on two summer periods.”

And for the 2026/2027 season Carnival Cruise Line has opened reservations for a number of new cruises that will sail from popular US ports on both the East and West coasts.

Carnival posted adjusted earnings of 11 cents per share for the quarter, swinging from a loss of 31 cents per share a year earlier and beating Wall Street’s call for a loss of 1 cent per share.

Revenue rose 17.7% to a second-quarter record of $5.78 billion and beat analysts’ forecast of $5.68 billion.

“We’re hitting records on top of previous records, which clearly tells us that the strength and demand we’ve built continues into next year and beyond,” Weinstein said.

Carnival raised its guidance for 2024 adjusted net income by $275 million to $1.55 billion, compared with analysts’ estimates of $1.37 billion.

The company guided analysts to third-quarter adjusted net income up 35% to $1.58 billion, compared with their consensus estimate of $1.54 billion.

Analyst: “Carnival remains the best choice in the leisure group”

Analysts expect third-quarter profit to rise 29% to $1.11 per share, while sales are expected to rise 13% to $7.75 billion.

Carnival shares are up 2.4% year-to-date and nearly 26% year-over-year.

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The company is scheduled to report third-quarter results on Sept. 30, and analysts have adjusted their price targets for Carnival shares.

On Sept. 20, Stifel analyst Steven Wieczynski raised the investment firm’s price target for Carnival to $27 from $25 and affirmed a buy rating on the stock, according to The Fly.

The analyst said he expected Carnival to be positioned to raise its full-year guidance again when it reports earnings.

The stock has rallied recently and likely already includes a beat-and-raise quarter, but Stifel still sees upside and “wouldn’t be surprised to see next year’s EPS come in at two handles when all is said and done.” done,” Wieczynski added. .

Mizuho analyst Ben Chaiken raised the company’s price target for Carnival to $25 from $22, while maintaining an outperform rating on the stock.

The analyst said Carnival continued to be the top pick in the leisure group. Chaiken sees upside from lower fuel prices because the company has no hedges and upside from currency movements.

“Amidst the shutdown caused by Covid, CCL sold approximately 20% of its fleet at a lower margin, which we believe sets the stage for stronger than expected operating leverage now that CCL is fully occupied,” Chaiken said .

The analyst also sees upside for Carnival’s underlying trends from strong yield growth and improving operating leverage. The stock offers compelling free cash flow and a deleveraging opportunity, he added.

“In October, CCL is holding an Investor Day that could provide the company with an opportunity to provide insight into where they stand relative to their long-term Ebitda/profitability goals,” Chaiken said.

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