Carnival Stock Performance Ahead of Q1 Earnings: Should You Buy Now or Wait?

Carnival Corporation (CCL) is gearing up for its first-quarter earnings report for fiscal 2025, and many are wondering whether now is the right time to invest in its stock. Recent trends indicate that Carnival's performance could be strong, thanks to increasing demand for cruises, fleet optimization, and expansion strategies.

Understanding CCL’s Q1 Estimate Revisions

The Zacks Consensus Estimate currently places Carnival's earnings for the first fiscal quarter at 2 cents per share. This figure indicates an impressive year-over-year growth of 114.3%. Interestingly, this estimate has remained unchanged over the past 60 days, suggesting stability in analyst expectations.

For revenue, the estimate stands at $5.74 billion, reflecting a 6.3% increase compared to the same quarter last year. This positive revenue growth can be attributed to several factors, which we will explore further.

Carnival’s Earnings Surprise History

Carnival has historically surpassed earnings expectations, boasting a strong record of beating the consensus mark in the past four quarters. The company's average surprise over this period is an impressive 326.4%, signaling a consistent ability to exceed analyst forecasts.

Q1 Earnings Whispers for Carnival

Although our models suggest that it is not definitively predictable whether CCL will beat earnings this time, there are positive indicators. Optimally, a combination of a positive Earnings ESP (Earnings Surprise Prediction) and a strong Zacks Rank would suggest higher chances for such an outcome. Currently, Carnival holds an Earnings ESP of -2.11%, which may imply some challenges ahead.

As for the Zacks Rank, Carnival has a ranking of #3 (Hold), indicating a neutral position in the market.

Factors Contributing to Carnival’s Q1 Performance

The anticipated fiscal first-quarter performance for Carnival is expected to be bolstered by several key factors, including strong consumer demand and record bookings. The company has been experiencing solid booking trends for multiple quarters, which are further enhanced by improved operations across its various brands.

Furthermore, higher pricing for cruises and increased onboard spending have significantly driven yield growth. The company's cost-saving initiatives have also played a vital role in improving profitability.

Our estimates suggest that passenger ticket revenue could rise by 5.1%, reaching $3.8 billion year over year. Additionally, onboard and other revenues may increase by 6.5% to approximately $1.9 billion.

Carnival's investments in advertising have been fruitful, leading to enhanced demand through various campaigns launched during peak periods. In 2024, web visits to Carnival's platforms rose by 40%, along with a 60% increase in paid searches compared to pre-pandemic levels. The momentum is expected to persist into the first quarter of fiscal 2025.

Key marketing strategies, such as collaborating with travel agents and bridging the price gap with land-based vacations, have successfully attracted both new and returning guests, thereby improving the company's market share.

Furthermore, a strong pricing environment across itineraries is projected to enhance yields in the upcoming quarter. Our model predicts that adjusted EBITDA for the first quarter may increase by 19.1% year over year, reaching approximately $1.01 billion.

However, it is vital to note that rising operating costs could impact Carnival's net earnings. Total operating expenses are expected to escalate by 3.4% to $3.8 billion in the first fiscal quarter.

Carnival's Stock Price Performance and Valuation

In terms of stock performance, CCL shares have increased by 29.9% over the past year, significantly outperforming the broader Zacks Leisure and Recreation Services industry, which rose by only 4.9%. During this period, competitors like Norwegian Cruise Line Holdings and Royal Caribbean Cruises saw stock increases of 3.1% and an impressive 71.5%, respectively.

CCL Stock Price Valuation

Carnival's shares are currently trading at an attractive discount, with a forward 12-month price-to-sales (P/S) ratio of 0.93X. This is significantly below the industry average of 2.01X, indicating a possibly advantageous investment opportunity.

Investment Thoughts on Carnival Corporation

With robust demand trends, strong booking momentum, and strategic marketing campaigns to drive growth, Carnival has positioned itself for potential success. The company’s ability to leverage pricing power and enhance onboard spending has led to increased yields, aided by improved operational execution.

However, despite solid revenue growth, rising costs present challenges for overall profitability. While Carnival's current valuation appears discounted compared to industry peers, the stock's previous gains may lead to cautious approaches from new investors. For those already invested, maintaining positions may be wise to capitalize on potential future strength, while fresh investments should consider waiting for clearer indicators of sustained profitability.

Carnival, Earnings, Stocks