Carnival Corp. Jumps 3% on Q3 Business Update

The world’s largest cruise line operator Carnival Corporation & plc (CCL) provided its third-quarter business update showing higher booking volumes and voyages generating positive cash flows. Shares jumped 3% on the news, closing at $25.44 on September 24.

Don't Miss our Black Friday Offers:

Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter

The company posted an adjusted loss of $2 billion and ended the third quarter with $7.8 billion in liquidity. Carnival stated that eight of its nine brands have resumed guest operations.

Markedly, though the travel and leisure industry is still negatively impacted by the ongoing effects of the Delta variant, the company did manage to record high booking volumes in Q3 compared to Q1 of FY21.

The company’s monthly average cash burn rate was $510 million, in line with the monthly cash burn rate reported in the first half of 2021. (See Carnival Corp. stock charts on TipRanks)

CCL also noted that as the company gradually approaches full guest cruise operation levels, it will continue to incur incremental restart expenses, which will lead to a higher monthly average cash burn rate in the fourth quarter, as well as an adjusted loss for the fourth quarter and twelve months ending November 30, 2021.

Additionally, occupancy increased to 54% in the quarter, and available lower berth days (ALBD) stood at 3.8 million, representing 17% of total fleet capacity.

Commenting on the progress, President and CEO Arnold Donald said, “Carnival Cruise Line resumed operations in July offering Caribbean and Alaska sailings somewhat comparable to prior years and achieved 20% higher revenue per passenger cruise day (PCD) than 2019 peak levels, despite onboard credits from cancelled cruises. Even with the unusually short booking window and capacity limitations, the brand achieved occupancy of approximately 70%, which speaks to the strong underlying demand for our core product.”

Donald added, “Looking forward, we continue to work towards resuming full guest cruise operations by next spring, in time for our important summer season, where we make the bulk of our operating profit.”

Following the news, Deutsche Bank analyst Chris Woronka maintained a Hold rating on the stock with a price target of $25, implying 1.7% downside potential to current levels.

Woronka said, “We believe sentiment for cruise stocks broadly has begun to lean more positively in recent weeks as investors anticipate a potential decline in the spread of the Delta variant. We also believe cruise stocks have probably benefited from outflows in Macau-centric gaming stocks. While cruise industry data points are likely to continue trending incrementally positive, based on our read of 2023 consensus EBITDA forecasts, we believe the combination of improved pricing, higher margins, and benefits from new hardware are well understood.”

Overall, the stock has a Hold consensus rating based on 3 Buys, 1 Hold, and 4 Sells. The average Carnival Corporation price target of $26.16 implies 2.8% upside potential to current levels. Shares have gained 66.2% over the past year.