Riding the wake of a demand spike that started late last year, Carnival Corporation (CCL 2.57%) (CUK 2.32%) just posted another record quarter. In fact, CEO Josh Weinstein reported that Carnival's "phenomenal wave season" is still "going strong midway through the year." 

Let's examine Carnival's second-quarter earnings and determine whether this cruise line stock is a buy.

A new Q2 revenue record

During the company's earnings call last month, Weinstein highlighted how "strengthened demand delivered outperformance in the second quarter for revenue, adjusted EBITDA, and the bottom line."

Indeed, revenue reached a new Q2 record at $4.9 billion, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) landed at the high end of Carnival's guidance range, finishing at $681 million.

Although the Miami-based carrier took a generally accepted accounting principles (GAAP) net loss of $407 million, the result was notably better than management's expectation of a Q2 loss between $425 million and $525 million. Although still unprofitable, Carnival's Q2 performance was encouraging and marked definitive progress.

Carnival's net per diems, or net cruise revenue per passenger cruise day, climbed 7.5% versus last year to reach the upper end of company guidance. Based on this strength in onboard-revenue generation amid higher prices, Carnival raised its expectations for net per diems by 2.5 points for the second half of 2023.

Carnival's Regal Princess ship cruises through Istanbul.

Image source: Carnival Corporation.

CFO David Bernstein boasted how the company "achieved a significant milestone with net yields turning positive as compared to 2019." In addition to net yields flipping positive last quarter, operating income, cash from operations, and adjusted free cash flow all finished on the plus side.

Inflation still a factor

Despite record revenue last quarter, higher fuel prices and other cruise costs impacted the bottom line. Cruise costs for full-year 2023 are now expected to be up 10% to 11%, or 1.5 points higher than Carnival's March guidance figures.

Increases in employee-incentive programs, marketing investments, and "a slower-than-expected ramp-down in inflationary pressures than previously anticipated" are to blame for the cost increases, according to Bernstein. However, he affirmed that the 2.5-point increase in net per diems "far outweighs" the cost-guidance increase.

All-time high booking volumes

Having reached 59% of 2019's EBITDA in Q1 and 73% in Q2, Carnival expects to hit roughly 85% of it in Q3. By Q4, it anticipates reaching 100% of 2019 EBITDA levels. For the year, the cruise line projects $4.1 billion to $4.25 billion in adjusted EBITDA -- above the high end of its previous guidance range.

In another pleasant surprise last quarter, booking volumes reached an all-time high, surpassing the previous record achieved in Q1. Normally, Q1 is the peak period for booking, but this year Q2 took the top spot, coming in 17% higher than the same period in 2019. 

And Carnival's booked position for 2024 also sits at a record level. As a result, customer deposits reached a new all-time high of $7.2 billion, markedly higher than the prior record of $6 billion. 

Closing the gap to pre-pandemic levels, full-year 2023 occupancy is projected to reach 100% or more. Beyond this year, Carnival anticipates occupancy to exceed its historical range.

How can a cruise ship be more than 100% occupied? Since occupancy is based on just two passengers per stateroom, when more than two guests stay in that room -- kids staying with their parents, for example -- can push the occupancy figure beyond 100%. 

Is the stock a buy?

Although Carnival stock gained well over 100% this year, it also still trades 75% below its 2018 all-time high. Considering that Carnival strides closer to profitability each quarter, and that revenue and bookings are already setting new records, I think the stock will eventually reflect some of the company's recent successes.

I call Carnival stock a buy in today's market. Investors should closely monitor future earnings reports to ensure that current momentum continues and management stays on course.