Please ensure Javascript is enabled for purposes of website accessibility

Carnival Stock Earns Its All-Time Highs

By Rick Munarriz - Mar 29, 2017 at 1:33PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The world's largest cruise ship operator reports well-received quarterly results on Tuesday, boosting its profit guidance for the entire fiscal year.

Carnival Corporation & plc (CCL 1.97%) (CUK 3.04%) claims that 2017 is "off to a good start" following Tuesday's quarterly report, but don't make the mistake of thinking that it was smooth sailing for the world's largest cruise line operator. Increased demand spurring an uptick in bookings and passengers willing to pay more for their berths combined to more than offset the challenges of rising fuel costs and negative foreign currency swings. 

Revenue clocked in at $3.791 billion for the fiscal first quarter, 4% ahead of the prior year's showing. A 3% uptick in ticket revenue -- accounting for the lion's share of its business at 74% of Carnival's top-line results -- and a 6% gain in what it made from passengers once on board worked hand-in-hand to deliver its fifth consecutive quarter of year-over-year growth. Streaks are important in this cyclical travel niche. The five-quarter run of positive top-line gains follows a string of four quarters of declining revenue. 

Reported income more than doubled, but that's a figure that investors need to take with a grain of salt water. Carnival routinely scores big gains and losses as it bets on fuel derivatives to offset potential spikes in energy costs. Back out those gains and losses as well as other net charges and Carnival's adjusted net income of $0.38 a share is roughly in line with the $0.39 a share it earned during last year's fiscal first quarter. 

Carnival Vista, a new ship in Carnival's fleet in 2016.

Image source: Carnival.  

Catching a wave

Gross revenue yields is a metric that any cruise industry investors needs to watch, as it gauges the revenue that Carnival is scoring per available lower berth day. Gross revenue yields rose a modest 0.1%, but in constant currency, we're talking about net revenue yields rising 3.8% for the quarter, nearly double the midpoint of the guidance it provided for the period back in December. 

It's not getting any cheaper to run a cruise ship, as gross cruise costs per available lower berth day rose 2.9%. Exclude fuel costs and net cruise costs rose 3.2% on a constant currency basis, this metric also clocked in higher than Carnival's earlier guidance. 

Wave season -- the first few weeks of the calendar year -- is peak booking season for cruise lines, and Carnival's faring well. Advance bookings for the balance of 2017 are well ahead of where they were at this point last year, and folks are paying more for their cabins. This obviously means that there are now fewer berths available, an inventory feat that should keep cruise fares as buoyant as the vessels. Carnival is boosting its bottom-line outlook, expecting to earn between $3.50 and $3.70 in adjusted earnings per share. Back in December, the range was between $3.30 and $3.60 per share.

Boost your guidance and paint a rosy portrait of your near-term prospects and the market's going to like what it hears. Carnival's strong report on Tuesday sent the shares to an all-time high. Between strong bookings and the new Carnival Ocean wearable tech that should enhance the cruising experience as well as the Carnival's coffers, fresh highs this week are not a surprise.  

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Carnival Corporation Stock Quote
Carnival Corporation
CCL
$8.82 (1.97%) $0.17
Carnival Corporation Stock Quote
Carnival Corporation
CUK
$8.14 (3.04%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
311%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.