As Carnival (NYSE:CCL) fell by 5% today, investors might assume that there’s something terribly wrong with the company. Yet, the stock should be cruising ahead instead of falling, in my opinion. I am bullish on CCL stock because the company’s quarterly results (released earlier today) are outstanding, and Carnival’s full-year outlook is optimistic. Plus, the company is generally favored by analysts.
Carnival is a well-known cruise line operator. There’s been a resurgence of COVID-19 infections this year, so it’s understandable if some stock traders might be concerned about Carnival.
However, Carnival’s still-fresh quarterly results ought to put those concerns to rest. So, if short-term stock traders are dumping their Carnival shares based on irrational fears or an overreaction, sensible investors should consider it an opportunity.
Carnival Beats the Street’s EPS Expectations Again
For the third consecutive quarter, Carnival beat the consensus EPS estimate. Not only that, but the company is steering the ship into profitable territory.
Achieving profitability is a notable achievement for a company that’s been rocked by COVID-19 and persistent inflation. Here’s the rundown: analysts expected Carnival to report second-quarter 2023 EPS of $0.75, but the actual result was $0.86. Furthermore, this result demonstrates continuous improvement over Carnival’s EPS of -$0.31 in Q2 and -$0.55 in Q1.
Also, Carnival’s quarterly revenue increased by 58.9% year-over-year to $6.85 billion. This figure came in $160 million above the consensus forecast. On top of all that, Carnival managed to reduce its debt by almost $4 billion from its Q1-2023 peak and ended Q3 with $5.7 billion of liquidity.
Given these excellent results, Carnival CEO Josh Weinstein earned some bragging rights for his company. “We delivered over $1 billion to the bottom line with revenue reaching an all-time high,” Weinstein announced.
Stock Traders are Unimpressed with Carnival’s Quarterly Guidance
In some instances, traders will sell a stock after a quarterly earnings report — not because of the actual results but because they didn’t like the company’s forward guidance. This appears to be the case with Carnival stock today.
Actually, Carnival’s full-year 2023 EPS outlook isn’t objectionable. The company expects adjusted earnings of -$0.12 to -$0.04 per share, while analysts had called for -$0.16 per share.
However, for the fourth quarter, Carnival provided guidance of adjusted earnings of -$0.18 to -$0.10 per share. The midpoint of that range is below Wall Street’s call for Q4 adjusted earnings of -$0.11 per share.
To me, at least, it seems like short-term stock traders are nitpicking and reaching for a reason to sell CCL stock today. I would consider Carnival’s full-year forecast to be more important than the company’s Q4 outlook, but apparently, today’s investors don’t see it that way.
It’s also possible that investors are worried about the impact of rising fuel prices on Carnival’s bottom line. Macquarie analyst Paul Golding took this headwind into consideration when he lowered his price target on Carnival stock from $17 to $16 recently. On the other hand, Golding reiterated his Outperform rating on the shares, so it’s probably reasonable to conclude that he’s not excessively concerned about Carnival right now.
Is Carnival Stock a Buy, According to Analysts?
Do Wall Street’s experts see Carnival as a sinking ship? It might surprise you to discover how bullish the analyst community is. On TipRanks, CCL comes in as a Strong Buy based on 10 Buys, three Holds, and no Sell ratings assigned by analysts in the past three months. The average Carnival stock price target is $19.77, implying 44% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell CCL stock, the most accurate analyst covering the stock (on a one-year timeframe) is Benjamin Chaiken of Credit Suisse (NYSE:CS), with an average return of 19.29% per rating and a 75% success rate. Click on the image below to learn more.
Conclusion: Should You Consider Carnival Stock?
Carnival still has to navigate choppy seas due to persistent inflation and high fuel costs. However, Carnival’s strong quarterly results and reasonable full-year guidance should keep sensible investors calm and relaxed.
Yet, short-term traders weren’t calm and relaxed today as they dumped their Carnival shares. That’s not a problem, though, and I feel that long-term investors should consider CCL stock as a high-conviction contrarian trade for the rest of 2023.