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Can Carnival's Favorable Leverage Trends Unlock a Shareholder Windfall?
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Key Takeaways
Carnival reduced secured debt by $2.5B, refinanced $11B and prepaid $1B in Q3.
CCL ended Q3 FY25 with a net debt-to-EBITDA ratio of 3.6x and is targeting below 3x by 2026.
With fewer ship deliveries, Carnival eyes a stronger cash flow and a dividend return once leverage stabilizes.
Carnival Corporation & plc (CCL - Free Report) is steering its financial ship toward calmer waters. After years of pandemic-driven leverage, the cruise leader is now executing one of the sector’s most aggressive deleveraging programs — a pivot increasingly catching investor attention. In the third quarter of fiscal 2025, management reduced secured debt by nearly $2.5 billion, refinanced over $11 billion at favorable rates and prepaid an additional $1 billion, accelerating its return to investment-grade credit metrics.
Carnival ended the fiscal third quarter with a net debt-to-EBITDA ratio of 3.6x, down from 4.3x a year ago, and is targeting below 3x by 2026. This progress prompted a recent Moody’s upgrade and positive outlook, a key step toward regaining full investment-grade status. CFO David Bernstein described the company’s transformation as “rebuilding our financial fortress,” emphasizing that debt reduction no longer needs to be “priority one, two and three.”
Management also announced plans to redeem all outstanding convertible notes by year-end — using $500 million in cash and equity to retire obligations and further lower leverage to 3.5x entering fiscal 2026. With limited ship deliveries ahead (none in 2026 and one per year thereafter), Carnival expects free cash flow to surge, paving the way for shareholder returns. CEO Josh Weinstein confirmed that reinstating the dividend remains a priority once leverage stabilizes below 3.5x, framing it as a natural next step in the company’s financial turnaround.
Peer Comparisons
Royal Caribbean Cruises Ltd. (RCL - Free Report) is entering its next phase of balance-sheet strength and shareholder-focused execution. In the second quarter of fiscal 2025, the company secured investment-grade ratings from all three major credit agencies and reported liquidity of $7.1 billion, underscoring the strength of its cash generation and disciplined capital structure.
RCL expects to reduce net leverage to the mid-2x range by 2025-end. Management emphasized that deleveraging is largely complete, paving the way for competitive dividends and opportunistic buybacks. With limited near-term maturities and expanding credit facilities, Royal Caribbean now operates from a position of financial leadership in the sector — shifting its focus from recovery to capital returns and long-term growth.
Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) remains in the middle stages of balance-sheet restoration. The company reduced net leverage to 5.3x in second-quarter 2025 (marking a 2-turn improvement since 2023) and reaffirmed its goal of reaching the mid-4x range by 2026. To support this effort, NCLH expanded its revolving credit facility by nearly 50% to $2.5 billion, enhancing liquidity and flexibility. The company stated that, excluding temporary FX effects, leverage would already stand near 4.9x, highlighting meaningful underlying progress. Management continues to prioritize debt reduction and cost discipline to rebuild NCLH's financial profile.
CCL’s Price Performance, Valuation & Estimates
Shares of Carnival have surged 64.4% in the past six months compared with the industry’s growth of 28.3%.
CCL Six-Month Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, CCL trades at a forward price-to-earnings ratio of 12.51X, significantly below the industry’s average of 17.58X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CCL’s fiscal 2025 and 2026 earnings implies a year-over-year uptick of 47.9% and 12.9%, respectively. The EPS estimates for fiscal 2025 and 2026 have increased in the past 60 days.
Image: Bigstock
Can Carnival's Favorable Leverage Trends Unlock a Shareholder Windfall?
Key Takeaways
Carnival Corporation & plc (CCL - Free Report) is steering its financial ship toward calmer waters. After years of pandemic-driven leverage, the cruise leader is now executing one of the sector’s most aggressive deleveraging programs — a pivot increasingly catching investor attention. In the third quarter of fiscal 2025, management reduced secured debt by nearly $2.5 billion, refinanced over $11 billion at favorable rates and prepaid an additional $1 billion, accelerating its return to investment-grade credit metrics.
Carnival ended the fiscal third quarter with a net debt-to-EBITDA ratio of 3.6x, down from 4.3x a year ago, and is targeting below 3x by 2026. This progress prompted a recent Moody’s upgrade and positive outlook, a key step toward regaining full investment-grade status. CFO David Bernstein described the company’s transformation as “rebuilding our financial fortress,” emphasizing that debt reduction no longer needs to be “priority one, two and three.”
Management also announced plans to redeem all outstanding convertible notes by year-end — using $500 million in cash and equity to retire obligations and further lower leverage to 3.5x entering fiscal 2026. With limited ship deliveries ahead (none in 2026 and one per year thereafter), Carnival expects free cash flow to surge, paving the way for shareholder returns. CEO Josh Weinstein confirmed that reinstating the dividend remains a priority once leverage stabilizes below 3.5x, framing it as a natural next step in the company’s financial turnaround.
Peer Comparisons
Royal Caribbean Cruises Ltd. (RCL - Free Report) is entering its next phase of balance-sheet strength and shareholder-focused execution. In the second quarter of fiscal 2025, the company secured investment-grade ratings from all three major credit agencies and reported liquidity of $7.1 billion, underscoring the strength of its cash generation and disciplined capital structure.
RCL expects to reduce net leverage to the mid-2x range by 2025-end. Management emphasized that deleveraging is largely complete, paving the way for competitive dividends and opportunistic buybacks. With limited near-term maturities and expanding credit facilities, Royal Caribbean now operates from a position of financial leadership in the sector — shifting its focus from recovery to capital returns and long-term growth.
Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) remains in the middle stages of balance-sheet restoration. The company reduced net leverage to 5.3x in second-quarter 2025 (marking a 2-turn improvement since 2023) and reaffirmed its goal of reaching the mid-4x range by 2026. To support this effort, NCLH expanded its revolving credit facility by nearly 50% to $2.5 billion, enhancing liquidity and flexibility. The company stated that, excluding temporary FX effects, leverage would already stand near 4.9x, highlighting meaningful underlying progress. Management continues to prioritize debt reduction and cost discipline to rebuild NCLH's financial profile.
CCL’s Price Performance, Valuation & Estimates
Shares of Carnival have surged 64.4% in the past six months compared with the industry’s growth of 28.3%.
CCL Six-Month Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, CCL trades at a forward price-to-earnings ratio of 12.51X, significantly below the industry’s average of 17.58X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CCL’s fiscal 2025 and 2026 earnings implies a year-over-year uptick of 47.9% and 12.9%, respectively. The EPS estimates for fiscal 2025 and 2026 have increased in the past 60 days.
Image Source: Zacks Investment Research
CCL stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.