Shares of cruise line operator Carnival (NYSE:CCL) closed up in today’s trading as investors await its Q2 earnings results on June 25 before the market opens. Analysts are expecting earnings per share to come in at -$0.02 on revenue of $5.69 billion. This equates to 93.5% and 16% year-over-year increases, respectively, according to TipRanks’ data.
This is ideal because earnings per share should grow faster than revenue as it demonstrates a high degree of operating and financial leverage in the business. In addition, it’s worth noting that CCL has beaten earnings estimates six times during the past eight quarters, as demonstrated in the image below.
Options Traders Anticipate a Large Move
Using TipRanks’ Options tool, we can see what options traders are expecting from the stock immediately after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement. If this sounds complicated, don’t worry, the Options tool does this for you. Indeed, it currently says that options traders are expecting a large 8.27% move in either direction.
Is CCL a Good Stock to Buy Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on CCL stock based on 15 Buys and one Sell assigned in the past three months, as indicated by the graphic below. After an 11% rally in its share price over the past year, the average CCL price target of $22 per share implies 35.84% upside potential. However, hedge funds seem to disagree with analysts.
When it comes to “smart money,” money managers don’t seem to be all that confident in CCL stock. Indeed, hedge funds decreased their holdings in the stock by 44.3 million shares during the last quarter. As a result, they have a very negative confidence signal.
