Please ensure Javascript is enabled for purposes of website accessibility

Why Carnival Stock Plunged 7% This Morning

By Rich Smith – Jun 18, 2020 at 12:02PM

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

Finally! Actual news!

What happened

Cruise line giant Carnival Corporation (CCL -6.06%) reported an honest-to-goodness earnings report this morning, finally giving investors news to trade on that doesn't boil down to vague impressions about whether the coronavirus situation is getting better or worse.

Unfortunately for Carnival, the actual news it had to report was a lot worse than what Wall Street had told investors to expect: Heading into Q2 earnings this morning, Street analysts had forecast a $1.56-per-share loss on revenue of $1.1 billion. What Carnival reported, though, was a $3.30-per-share loss on revenue of just $0.7 billion.

Carnival stock promptly plunged 7% in early trading, and remains down 2% as of 11:25 a.m. EDT.

Collage showing a cruise ship, a man in a face mask and a microbe

Image source: Getty Images.

So what

And believe it or not, that was the good news -- the numbers Carnival was able to report "pro forma." When calculated according to generally accepted accounting principles (GAAP), Carnival's loss nearly doubled -- from $3.30 a share to a staggering $6.07 per share, as "non-cash impairment charges" exacerbated the business's underlying losses.

On the revenue front, with Carnival's multiple brand fleets confined to port by a CDC no-sail order for the bulk of the company's fiscal second quarter, unable to sail and unable to generate revenue, sales at the company plunged more than 85% in comparison to last year's Q2.  

Now what

Now Carnival's entire hope is that it will be allowed to sail again before it runs out of cash. So when will that happen?

"The company is unable to definitively predict when it will return to normal operations," admits Carnival. "As a result, the company is currently unable to provide an earnings forecast" either for Q3 or for the year as a whole. All Carnival can say for sure is that it "expects a net loss on both a U.S. GAAP and adjusted basis for the second half of 2020," which is far from surprising.

What may surprise investors -- and discourage them -- is that Carnival says its cash burn has been in line with its expectations, and the company has $7.6 billion in "available liquidity." Yet even so, Carnival anticipates having to sell even more stock, and take on even more debt, in order "to further enhance future liquidity."

Long story short, Q2 was bad, and Carnival isn't anywhere near being out of this recession yet.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.

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
$6.98 (-6.06%) $0.45

*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
339%
 
S&P 500 Returns
109%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

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.