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Carnival (CCL) Rides on Robust Booking and Ticket Price

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Carnival Corporation & plc (CCL - Free Report) is slowly getting over the pandemic blues, courtesy of resumption of sailing, robust booking and ticket price improvements for both of its North American and EAA brands. However, coronavirus-related woes are far from over. Let’s delve deeper.

Key Growth Drivers

Carnival has resumed operation with limited capacity. It will celebrate New Year’s with 55 ships or nearly 65% of its fleet capacity back in service. The company intends to have its full fleet back in operation in the spring of 2022. CCL announced that Carnival Cruise Lines resumed more shifts out of the United States than any other cruise brand, and achieved occupancy above 70%.

The company announced that booking volumes and book position are very encouraging. During the third quarter, booking volumes for all future cruises were higher than booking volumes during the first quarter of 2021. Carnival stated that cumulative advanced bookings for the second half of 2022 are ahead of a very robust 2019 as of Aug 31, 2021. Meanwhile, total customer deposits as of Aug 31, 2021 were $3.1 billion compared with $2.5 billion as of May 31, 2021. The company has opened bookings for 2023.

Carnival anticipates cash flow from operations to turn positive at some point in the early part of 2022. It anticipates generating higher EBITDA in 2023 compared to 2019.

The Zacks Rank #3 (Hold) company has been witnessing ticket price improvements for both its North American and EAA brands, with robust ticket price improvements in its core Caribbean deployment. CCL is optimistic on its innovations including the transformational new ocean experience platform featuring — Ocean Medallion, a guest experience platform; PlayOcean, a proprietary mobile gaming portfolio; and OceanView, a proprietary digital streaming network. These new offerings are anticipated to accelerate and enhance engagement, and step up the company’s already high guest experience delivery by leveraging its industry-leading scale.

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Concerns

The pandemic has been hurting the company’s operations and global bookings. It believes that the coronavirus crisis is likely to cause a delay in ship deliveries as the shipyards have been impacted as well. The company informed that the coronavirus has disrupted its supply chain and impacted the timing of opening for some destinations. However, it expects phased resumption of cruise operations to have a material impact on all aspects of its business, including the company's liquidity, financial position and results of operations. So far this year, the company’s shares have declined 9.9%, against the industry’s growth of 4.9%.

High debt remains a concern. At the end of Aug 31, 2021, Carnival’s long-term debt stood at $26.8 billion, almost flat compared with the first quarter of 2021. It ended third-quarter fiscal 2021 with cash and cash equivalent of $7.2 billion, compared with $9.3 billion at the end of May 31, 2021, which may not be enough to manage the high-debt level. Average monthly cash burn in the quarter was $510 million. At the end of third-quarter 2020, the company had a debt-to-capital ratio of 0.6.

Key Picks

Some better-ranked stocks in the Consumer Discretionary sector include Hilton Grand Vacations Inc. (HGV - Free Report) , Bluegreen Vacations Holding Corporation (BVH - Free Report) and Camping World Holdings, Inc. (CWH - Free Report) .

Hilton Grand Vacations sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 411.1%, on average. Shares of the company have jumped 14% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Hilton Grand Vacations’ current financial year sales and earnings per share suggests growth of 222.1% and 170.8%, respectively, from the year-ago period.

Bluegreen Vacations flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 695%, on average. Shares of the company have surged 35.5% in the past three months.

The Zacks Consensus Estimate for Bluegreen Vacations' current financial year sales and earnings per share indicates growth of 27.5% and 199.3%, respectively, from the year-ago period.

Camping World carries a Zacks Rank #2 (Buy). The company has been benefiting from the launch of a new peer-to-peer RV rental marketplace and a mobile service marketplace. It has been investing heavily in product development.

Camping World has a trailing four-quarter earnings surprise of 70.9%, on average. Shares of the company have appreciated 5.4% in the past three months. The Zacks Consensus Estimate for CWH’s current financial year sales and earnings per share suggests growth of 25.9% and 77.6%, respectively, from the year-ago period.