What happened

Shares of Carnival (CCL 0.44%), the world's biggest cruise line operator, were tumbling today after the company badly missed estimates in its third-quarter earnings report.

As of 11:15 a.m. ET, the stock was down 16%.

So what

Carnival continued to rebound from the pandemic in the third quarter, but its results fell short of expectations and it reported a significant loss.

Revenue jumped nearly 80% sequentially from the second quarter to $4.31 billion, but that still missed analysts' consensus estimate of $5.07 billion.

Occupancy rate was up 15 percentage points from the second quarter to 84%, showing customers are returning after the pandemic shut down the cruise industry for several months.

On the bottom line, Carnival posted adjusted EBITDA of $303 million, though it still lost $770 million in the quarter on a GAAP basis, or $0.65 per share, which was much worse than analysts' expectation of a loss of $0.13 per share.

CEO Josh Weinstein expressed optimism about the recovery, noting that booking volumes were now running ahead of 2019 levels after the company relaxed its COVID-19 protocols. He said, "During our third quarter our business continued its positive trajectory, achieving over $300 million of adjusted EBITDA and reaching nearly 90% occupancy on our August sailings. We are continuing to close the gap to 2019 as we progress through the year, building occupancy on higher capacity and lower unit costs."

Now what

In addition to Carnival missing estimates in the third quarter, investors were also disappointed with Q4 guidance, as the company called for a net loss and breakeven to slightly negative adjusted EBITDA due to seasonality. Carnival said it was increasing advertising spending to drive bookings in 2023, and it expects occupancy levels to return to historical levels next year.

Though customers are coming back, Carnival still has roughly $1.6 billion in annual interest expense to deal with on its $28.6 billion in debt. That's likely to make a return to profitability difficult in the near term, especially with interest rates rising. 

Given the underwhelming third-quarter results and weak guidance, it's easy to see why the stock is down today.