Carnival Books Wider-than-Expected Q4 Loss; Shares Rose

Carnival Corporation & plc (NYSE: CCL) has reported a larger-than-expected loss in the fourth quarter of Fiscal 2021. The cruise ship operator also posted net revenues that missed analysts’ expectations. Meanwhile, management remains hopeful and positive for the next year on the back of strong demand and improved operations. 

Following the news, shares of the company gained 3.4% to close at $18.90 on Monday. 

Carnival is one of the world’s largest leisure travel companies with a portfolio of nine of the world’s leading cruise lines sailing to all seven continents. 

Results in Detail 

Carnival incurred a loss of $2.31 per share, higher than the Street’s loss estimate of $1.28 per share. The company reported a loss of $2.41 per share in the same quarter last year. 

Total revenues generated during the quarter grew significantly year-over-year and stood at $1.29 billion but missed the consensus estimate of $1.34 billion. 

For the cruise segments, revenue per passenger cruise day (PCD) in the quarter rose 4% compared to a strong 2019 on the back of robust onboard and other revenue. 

Occupancy improved to 58% from 54% in the third quarter of 2021. Additionally, available lower berth days (ALBD) were 10.2 million, representing 47% of total fleet capacity. 

During the quarter, total customer deposits increased $360 million to $3.5 billion from $3.1 billion as of August 31, 2021, reflecting the third consecutive quarter of an increase in customer deposits. 

CEO Comments 

In response to fourth-quarter results and looking forward, the CEO of Carnival, Arnold Donald, said, “Our cash from operations turned positive in the month of November, and we expect consistently positive cash flow beginning in the second quarter of 2022 as additional ships resume guest cruise operations. We enter the year with $9.4 billion of liquidity, essentially the same liquidity level as last year but with significantly improved cash flow generation ahead, as ship operating cash flow and customer deposits continue to build.” 

Outlook 

For the first quarter of Fiscal 2022, ALBDs are expected to be 14.1 million, which represents 63% of total fleet capacity. 

The company expects a net loss for the first half of Fiscal 2022 and a profit for the second half. 

Donald said, “With over 60% of our capacity now in operation and the remainder planned by spring, we are well positioned for our seasonally strong summer period.” 

“Booking volumes continue to build for the remainder of 2022 and well into 2023 and we are achieving those early bookings with strong demand and pricing,” he added. 

Regarding sustainability, Donald noted, “We are operating the only five large cruise ships in the world currently powered by LNG and we will shortly take delivery of our sixth. Upon returning to full cruise operations, our LNG efforts combined with other innovative efforts to drive energy efficiency are forecasted to deliver a 10% reduction in unit fuel consumption on an annualized basis compared to 2019, a significant achievement on our path to decarbonization.” 

Looking forward, Carnival CFO David Bernstein commented, “During 2022, we will continue to be focused on pursuing refinancing opportunities to reduce interest rates and extend maturities. We believe we have the potential to generate higher EBITDA in 2023 compared to 2019 given our additional capacity and improved cost structure. Therefore, in 2023, our focus will shift to deleveraging driven by cash from operations.” 

Other Developments 

Carnival and Jabil, Inc. (NYSE: JBL) entered into a partnership to launch the first Experience Internet of Things consumer wearables manufacturing and fulfillment location in the Florida/Caribbean region. 

The first Princess Medallion device manufacturing facility outside Asia will be at Santo Domingo, the capital city of the Dominican Republic. Carnival will boost production capacity for its Caribbean cruises while supporting more than 600 jobs at Jabil’s Dominican Republic facility. 

The chief experience and innovation officer for Carnival, John Padgett, said, “The proximity of Jabil’s state-of-the-art facilities and factory automation along with its exceptional track record across consumer, medical and military device manufacturing gives us a tremendous opportunity to support the increased demand for our experiential IoT wearables and also support good-paying jobs in the Dominican Republic in the highly desirable sector of travel and tourism.” 

Wall Street’s Take  

Overall, the stock has a Hold consensus rating based on 4 unanimous Holds. The average Carnival price target of $30 implies 58.73% upside potential from current levels. Shares have fallen 10.3% over the past year. 

Website Traffic 

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (NYSE: SEMR), the world’s biggest website usage monitoring service, offers insight into Carnival’s performance this quarter. According to the tool, the Carnival website recorded a 53.58% increase in global visits in November compared to the same period last year. Also, a quarter-to-date comparison showed growth of 38.18% compared to Q4 2020, while year-to-date website traffic reflected a decline of 1.76%.

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