Key Points
- Travel and leisure companies were hit pretty hard by the lockdowns
- Carnival has noted their bookings are up 15 percent from 84 percent last quarter
- The current share value of $7.03, 52-week range $7.01 to $26.57
Travel and leisure companies were hit pretty hard by the lockdowns that came along with the global Covid-19 pandemic and among those who struggled the most are the cruise lines. Two major ocean liners—Royal Caribbean International and Carnival Cruise Line (NYSE: CCL) managed to get their operations back up relatively quickly, though with limited capacities and a bevy of Covid-related safety regulations.
Although these concessions may have kept these businesses afloat, in more ways than one, it has not been an easy dredge back to anything resembling normal. Carnival Co., for example, saw earnings plummet in March of 2020, from nearly $52 per share to only about $8.50 by the end of that month. Fortunately, the company has managed to buoy their business and even saw some rebound in early 2021. Lately, though, share value is back down and Carnival may need to get creative to bring in the revenue they need to get back on top.
Analysts seem to think this is inevitable, at some point, as they have assessed a current rating of HOLD with a price target of $13.85.
Business Volume is Improving
Carnival has noted their bookings are up 15 percent from 84 percent last quarter. That is far better than the 54 percent occupancy for the same quarter the previous year. Despite this, Carnival reported adjusted net losses of $770 million on $.4.3 billion in revenue. That is a loss of about 65 cent per share. Additionally, operating costs and overall expenses reached $3.4 billion for the quarter, nearly double that of 2021 Q3.
More important, perhaps, CCL suffered a big loss at the end of September which slashed roughly $2.5 billion from their market value.
At the same time, Norwegian (NYSE: NCLH) and Royal Caribbean (NYSE: RCL) both took losses, down by 18 and 13 percent, respectively. To be fair, the entire cruise industry appears to be struggling, mostly due to the aggressive debt they took on during the pandemic lockdown. Of course, these debts have dramatically increased recently thanks to rising interest rates.
Unlike most other industries in the travel and leisure category, cruise prices are set—for the most part—by demand. From the looks of their estimated earnings (per share), cruise line fares should be at historic lows. But with an upside of 102.14 percent, Carnival just may not need to discount their fares for long.
Earnings Are Also Improving
Indeed, cruise fares should be extremely affordable today, as the current Earnings Per Share (EPS) is only -$0.36 on sales of $4.5B. Let's hope they can turn things around before their next reporting date, which is Dec 2.
Looking, back, though, earnings per share should not be too much of a surprise. Starting with Q4 of 2021 analysts forecast an estimated range of -$1.78 to -$1.11. The consensus estimate sat at the median of -$1.44 but, unfortunately, reported earnings barely made the low limit, at -$1.72
The next year started out with much of the same but fared slightly better. Analysts had forecast an earnings range of -$1.88 to -$0.77 for Q1 of 2022 with a consensus estimate of -$1.28. Reported earnings may not have met the consensus, but the low limit margin was a little more substantial at -$1.65.
In the second quarter, it appeared as if this upward momentum was going to continue. For one, analysts forecast a better range of -$1.61 to -$0.95 for the second quarter of 2022 with a consensus estimate of -$1.21 that, once again, sat at just about the midpoint. Unfortunately, actual earnings could not keep pace, failing to meet the range at all, at -$1.64.
For the third quarter, analysts had very high hopes, projecting a range of -$0.59 to $0.41. This is the first time the range has even hinted at positive numbers in at least the last year. Still, the consensus estimate established a more realistic target of -$0.11; but even that was too high for the business. For Q3 2022, Carnival Cruise Line reported an abysmal earnings of -$0.58, near the range low.
High Hopes Lead to a HOLD Rating, at Least For Now
The current share value of $7.03, 52-week range $7.01 to $26.57. Share value has not managed to stay above $10 since the middle of June 2022. The last time share value dropped below $10 was Spring of 2020, with the lowest point reaching $7.97 on April 2, 2020. From then, share value wavered up and down to peak at $31.08 on June 3, 2021.
With that in mind, analysts offering a 12-month price target for Carnival Corp have arrived at a median price target of $10.73, with a rating of HOLD. While this is in the lower third of the $6.8 to $29 estimate range, it is certainly a welcome jump after a year of losses.
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