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Why Is Carnival (CCL) Up 1.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Carnival (CCL - Free Report) . Shares have added about 1.4% in that time frame, underperforming the S&P 500.

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

Carnival Q3 Earnings Top

Carnival reported third-quarter fiscal 2019 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings in the quarter under review came in at $2.63 per share, which exceeded the Zacks Consensus Estimate of $2.53 and also jumped 11.4% year over year. Also, revenues of $6,533 million outpaced the consensus mark of $6,178 million and increased 11.9% year over year. This upside can be attributed strength in passenger tickets, and onboard and other as well as tour and other businesses.

On a constant-currency basis, net revenue yields declined 0.5% year over year, which was in line with the company’s prior guidance. Notably, net on-board and other yields increased 2.3% in constant currency.

Segmental Revenues

Carnival generates revenues from the Passenger Tickets business, and the Onboard and Other as well as the Tour and Other segments. Revenues at the Passenger Tickets business segment increased 2.8% year over year to $4,477 million. Onboard and Other revenues totaled $1,855 million, up 41% year over year. Tour and Other revenues rose 19.8% year over year to $200 million.

Expenses

Net cruise costs (in constant dollar) per available lower berth day (ALBD), excluding fuel, decreased 3.2%. Gross cruise costs (including fuel) per ALBD, in current dollars, rose 9.4%.

Balance Sheet

Carnival exited the fiscal third quarter with cash and cash equivalents of approximately $1,153 million, down from $982 million as of Nov 30, 2018. Trade and other receivables summed $441 million, down from $358 million as of Nov 30, 2018. Long-term debt amounted to approximately $8,893 million. Cash from operations totaled $1,245 million in the quarter under review. Carnival’s capital expenditure was $427 million while it paid out dividend worth $347 million during the same period.

Q4 Outlook

Carnival expects fourth-quarter fiscal 2019 EPS to be in the range of 46-50 cents compared with adjusted earnings of 70 cents per share reported the prior-year quarter. The company expects Voyage disruptions due to weather, a ship delivery delay and U.S. government's policy change on travel to Cuba to impact four-quarter earnings by 7-9 cents. The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 65 cents. In constant currency, net revenue yields are expected to be down 2-3%. Also, net cruise costs (excluding fuel), per ALBD, are expected to increase by 4-5% compared with the prior-year figure, in constant currency.

Fiscal 2019 View

Carnival stated that 2019 results are likely to be impacted by Hurricane Dorian, the tensions in the Arabian Gulf, the delayed delivery of Costa Smeralda and the recent increase in fuel prices due to geopolitical events. Changes in fuel prices and currency exchange rates are likely to hurt company’s full-year earnings by 8 cents. Moreover, weather-related voyage interruptions, the tensions in the Arabian Gulf and a ship delivery delay are likely to have a negative impact of 4-6 cents in comparison to June guidance. However, the company continues to expect higher yields from North America and Australia brands but marginally less than the prior guidance. The company continues to expect lower yields in the Europe and Asia segment.

Considering the afore-mentioned factors, Carnival now expects 2019 EPS to be in the $4.23-$4.27 band, down from $4.25-$4.35 projected earlier. The consensus estimate for the current-year earnings is pegged at $4.33. Net cruise revenues are likely to improve 4%, with 4.2% capacity growth. However, Carnival expects net cruise costs (excluding fuel), per ALBD, to be up nearly 0.3% in constant currency compared with June guidance of up roughly 0.7%.

Fiscal 2020 Guidance

For fiscal 2020, the company expects capacity growth to be nearly 7%. Carnival anticipates  2020 fuel expense to be $1.8 billion compared with 2019 fuel expense of $1.6 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted -24.01% due to these changes.

VGM Scores

Currently, Carnival has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 trending upward for the stock, and the magnitude of this revision looks promising. 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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