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Carnival (CCL) Down 14.9% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Carnival (CCL - Free Report) . Shares have lost about 14.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Carnival due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Carnival Q3 Earnings & Revenues Surpass Estimates

Carnival reported better-than-expected third-quarter fiscal 2018 results. Earnings came in at $2.36 per share, which outpaced the Zacks Consensus Estimate of $2.31 and improved 3.1% year over year. Revenues of $5,836 million exceeded the consensus mark by $5,816 million and increased 5.8% year over year. This year-over-year top-line improvement can be attributed strength in passenger tickets, onboard and other as well as tour and other businesses.

Net revenue yields rose 2.9% year over year on a constant-currency basis. The upswing was primarily driven by higher net ticket, and net on-board and other yields that increased 2.2% and 5.1%, respectively, in constant currency.

Also, the company benefited from ongoing guest-experience efforts along with marketing and public-relation programs that drove cruise ticket prices in the reported quarter.

Segmental Revenues

Carnival generates revenues from Passenger Tickets business, Onboard and Other as well as Tour and Other segments. Revenues at the Passenger Tickets business segment increased 5.2% year over year to $4,353 million. Onboard and Other revenues totaled $1,316 million, up 7.6% year over year. Tour and Other revenues rose 8.4% year over year to $167 million.

Expenses

Net cruise costs (in constant dollar) per available lower berth day (ALBD), excluding fuel, increased 2.7% and were better than the June guided range of 3-4% increase. Gross cruise costs (including fuel) per ALBD in current dollars decreased 2.6%.

Balance Sheet

Carnival exited the third quarter with cash and cash equivalents of approximately $526 million, up from $395 million as of Nov 30, 2017. Trade and other receivables summed $366 million, up from $312 million in the fourth quarter of fiscal 2017. Long-term debt amounted to  approximately $8,297 million.

Cash from operations totaled $1,349 million in the quarter under review. Carnival had spent $583 million on capital expenditures and $356 million on dividends in the same period.

Fourth-Quarter 2018 Guidance

Fiscal fourth-quarter 2018 net revenue yields, in constant dollars, are anticipated to increase in the band of 1.5-2.5% year over year. Net cruise costs, excluding fuel per ALBD, are expected to decline in the range of 1-2% from the prior-year figure, on a constant-dollar basis.

Based on the above factors, Carnival expects adjusted earnings per share in the range of 65 cents-69 cents.

Fiscal 2018 Guidance

Carnival riased fiscal 2018 adjusted earnings per share guidance to the range of $4.21-$4.25 from $4.15-$4.25 projected earlier. The company had reported earnings of $3.82 per share in fiscal 2017.

Based on current booking trends, the company expects fiscal 2018 net revenue yields (in constant currency) to be up approximately 3.5% year over year compared with the prior guidance of up nearly 3%. Also, net cruise costs (in constant dollar) per ALBD, excluding fuel, for fiscal 2018 are anticipated to be up nearly 1.5% year over year.

Management noted that cumulative advance bookings for the first half of fiscal 2019 are ahead of the previous year at higher prices.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Carnival has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Carnival has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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