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Here's Why Investors Should Retain Carnival (CCL) Stock Now
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Carnival Corporation & plc (CCL - Free Report) will likely benefit from improved booking trends, fleet optimization efforts and cost-saving initiatives. However, supply chain disruptions and increased fuel prices remain headwinds.
Let us discuss why investors should retain the stock for the time being.
Key Growth Drivers
Carnival is benefitting from encouraging booking volumes and book positions. During the fiscal third quarter of 2022, the company reported accelerated booking volumes because of relaxed protocols and better alignment of land-based vacation alternatives. Cumulative advance bookings for the fourth quarter of fiscal 2022 are below the historical range. The company stated that cumulative advanced bookings for the first half of 2023 are above the historical ranges and at increased prices compared with 2019 levels. Meanwhile, total customer deposits as of Aug 31 were $4.8 billion compared with $5.1 billion as of May 31, 2022. As of Sep 30, 2022, 95% of the company's capacity had resumed guest cruise operations.
Carnival continues to focus on fleet optimization to drive growth. The company emphasized the exit of 23 less efficient ships from its fleet (since 2019). Although the initiative contracted the capacity growth to 2.2% (compounded annually from 2019 through 2025), the company remains optimistic about replacement with new ships and capitalization of pent-up demand. The company anticipates 50% of its capacity to comprise newly delivered, larger and efficient ships, thereby making way for a return to profitability and improvement in its return on invested capital. The company anticipates the fleet optimization initiative to boost revenues on the rise in premium-priced balcony cabins, an improved platform for onboard revenue opportunities and a reduction in ship-level unit costs.
Emphasis on cost-saving initiatives bodes well. In August 2022, the company announced the global rollout of Service Power Packages (a comprehensive set of technology upgrades) to reduce both fuel usage and greenhouse gas emissions and contribute to cost savings. This includes comprehensive upgrades to each ship's hotel HVAC systems, technical systems upgrades, state-of-the-art LED lighting systems and remote monitoring and maintenance of energy usage and performance. The company anticipates the upgrades to generate approximately $150 million in annual fuel cost savings by delivering an average of 5-10% fuel savings per ship.
Concerns
Image Source: Zacks Investment Research
Shares of Carnival have declined 52.7% so far this year compared with the industry’s 36.2% fall. The downside mainly resulted from the coronavirus crisis. China, which is closed to international travelers, will likely continue to hurt cruise operators. Given the crisis’ uncertainty, the company anticipates it to have a material impact on all aspects of its business, including the company's liquidity, financial position and results of operations.
Moroever, the invasion of Ukraine and its resulting impacts (including supply chain disruptions, increased fuel prices and international sanctions) have adversely affected the company’s operations. Due to the war, management has decided to withdraw all activity in Russia. The company anticipates the inability to find alternatives for the itineraries to disrupt booking patterns for some time.
Hyatt currently has a Zacks Rank #2 (Buy). H has a trailing four-quarter earnings surprise of 652.3%, on average. The stock has increased 11.4% in the past year.
The Zacks Consensus Estimate for H’s current financial year sales and earnings per share (EPS) indicates a surge of 92.6% and 121.8%, respectively, from the year-ago period’s reported levels.
Crocs currently has a Zacks Rank #2. CROX has a long-term earnings growth rate of 15%. Shares of Crocs have plunged 44% in the past year.
The Zacks Consensus Estimate for CROX’s 2022 sales and EPS indicates a rise of 51.5% and 23.7%, respectively, from the year-ago period’s levels.
Boyd Gaming carries a Zacks Rank #2. BYD has a long-term earnings growth rate of 12.8%. The stock has declined 0.6% in the past year.
The Zacks Consensus Estimate for BYD’s 2022 sales and EPS indicates growth of 4.5% and 12.5%, respectively, from the year-ago period’s reported levels.
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Here's Why Investors Should Retain Carnival (CCL) Stock Now
Carnival Corporation & plc (CCL - Free Report) will likely benefit from improved booking trends, fleet optimization efforts and cost-saving initiatives. However, supply chain disruptions and increased fuel prices remain headwinds.
Let us discuss why investors should retain the stock for the time being.
Key Growth Drivers
Carnival is benefitting from encouraging booking volumes and book positions. During the fiscal third quarter of 2022, the company reported accelerated booking volumes because of relaxed protocols and better alignment of land-based vacation alternatives. Cumulative advance bookings for the fourth quarter of fiscal 2022 are below the historical range. The company stated that cumulative advanced bookings for the first half of 2023 are above the historical ranges and at increased prices compared with 2019 levels. Meanwhile, total customer deposits as of Aug 31 were $4.8 billion compared with $5.1 billion as of May 31, 2022. As of Sep 30, 2022, 95% of the company's capacity had resumed guest cruise operations.
Carnival continues to focus on fleet optimization to drive growth. The company emphasized the exit of 23 less efficient ships from its fleet (since 2019). Although the initiative contracted the capacity growth to 2.2% (compounded annually from 2019 through 2025), the company remains optimistic about replacement with new ships and capitalization of pent-up demand. The company anticipates 50% of its capacity to comprise newly delivered, larger and efficient ships, thereby making way for a return to profitability and improvement in its return on invested capital. The company anticipates the fleet optimization initiative to boost revenues on the rise in premium-priced balcony cabins, an improved platform for onboard revenue opportunities and a reduction in ship-level unit costs.
Emphasis on cost-saving initiatives bodes well. In August 2022, the company announced the global rollout of Service Power Packages (a comprehensive set of technology upgrades) to reduce both fuel usage and greenhouse gas emissions and contribute to cost savings. This includes comprehensive upgrades to each ship's hotel HVAC systems, technical systems upgrades, state-of-the-art LED lighting systems and remote monitoring and maintenance of energy usage and performance. The company anticipates the upgrades to generate approximately $150 million in annual fuel cost savings by delivering an average of 5-10% fuel savings per ship.
Concerns
Image Source: Zacks Investment Research
Shares of Carnival have declined 52.7% so far this year compared with the industry’s 36.2% fall. The downside mainly resulted from the coronavirus crisis. China, which is closed to international travelers, will likely continue to hurt cruise operators. Given the crisis’ uncertainty, the company anticipates it to have a material impact on all aspects of its business, including the company's liquidity, financial position and results of operations.
Moroever, the invasion of Ukraine and its resulting impacts (including supply chain disruptions, increased fuel prices and international sanctions) have adversely affected the company’s operations. Due to the war, management has decided to withdraw all activity in Russia. The company anticipates the inability to find alternatives for the itineraries to disrupt booking patterns for some time.
Zacks Rank & Key Picks
Carnival currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Hyatt Hotels Corporation (H - Free Report) , Crocs, Inc. (CROX - Free Report) and Boyd Gaming Corporation (BYD - Free Report) .
Hyatt currently has a Zacks Rank #2 (Buy). H has a trailing four-quarter earnings surprise of 652.3%, on average. The stock has increased 11.4% in the past year.
The Zacks Consensus Estimate for H’s current financial year sales and earnings per share (EPS) indicates a surge of 92.6% and 121.8%, respectively, from the year-ago period’s reported levels.
Crocs currently has a Zacks Rank #2. CROX has a long-term earnings growth rate of 15%. Shares of Crocs have plunged 44% in the past year.
The Zacks Consensus Estimate for CROX’s 2022 sales and EPS indicates a rise of 51.5% and 23.7%, respectively, from the year-ago period’s levels.
Boyd Gaming carries a Zacks Rank #2. BYD has a long-term earnings growth rate of 12.8%. The stock has declined 0.6% in the past year.
The Zacks Consensus Estimate for BYD’s 2022 sales and EPS indicates growth of 4.5% and 12.5%, respectively, from the year-ago period’s reported levels.