Carnival beats expectations, sets records in fiscal third quarter

Carnival (CCL -0.32%) (CUK -1.13%)the leading global cruise line operator, reported its fiscal third quarter earnings on September 30. The results, which included record revenue and net income, significantly exceeded management’s expectations. For the quarter ended Aug. 31, Carnival reported net income of $1.74 billion ($1.26 diluted earnings per share), compared with estimates of $1.58 billion. Adjusted net income was $1.75 billion ($1.27 in adjusted EPS), again beating guidance. The company’s overall performance was supported by robust demand, strategic cost management and record-setting metrics across several key financial areas.

Source: Management guidance from the fiscal second quarter earnings report, released June 25.

Carnival overview

Carnival operates a fleet of cruise ships under various brands, including Carnival Cruise Line, Princess Cruises and Holland America Line. Each brand offers unique experiences and targets different customer demographics. The company focuses on providing exceptional holiday experiences with a commitment to sustainability and compliance. It is the largest player in the global cruise industry, which gives it economies of scale and strong brand recognition.

Notable developments during the quarter

The third fiscal quarter of 2024 was marked by several significant achievements for Carnival. Notably, it reported record revenue of $7.90 billion. Strong demand and effective pricing strategies led to 8.7% year-over-year net yield growth, beating management’s guidance for 8.0% growth.

Operating income reached $2.18 billion, up 34.6% from $1.62 billion in fiscal Q3 2023, reflecting high operational efficiency. Adjusted EBITDA hit a record $2.82 billion, beating the company’s estimate of $2.66 billion. Such results underscore Carnival’s effective cost control and its ability to capitalize on economies of scale.

Customer deposits, a key indicator of future revenue, reached $6.82 billion, setting a new record in the third quarter.

On the expenses side, available lower berth day (ALBD) cruise costs increased to $196.98 compared to $190.58 in Q3 2023, an increase of 3.4%. Adjusted cruise costs, excluding fuel, decreased 0.4% to $103.97 per ALBD from $104.42 a year earlier. These values ​​highlight effective cost management and the company’s ability to offset higher operating expenses.

Looking ahead

Carnival is optimistic about its financial prospects. It raised its full-year 2024 adjusted EBITDA guidance to about $6.0 billion, up from its previous estimate of $5.83 billion. In addition, full-year net returns are now expected to increase by around 10.4%, compared to 10.25% previously guided for.

Investors should keep in mind Carnival’s debt management and cost structure adjustments, particularly related to fuel prices, which may have a significant impact on its operating costs. The company’s longer-range efforts to modernize its fleet and expand passenger capacity through new ship deliveries will also be critical factors for its growth. Overall, Carnival is well positioned to capitalize on robust cruise demand and deliver sustained financial performance.