Carnival Corp. (CCL -0.66%) stock gained 130% in 2023 according to data provided by S&P Global Market Intelligence. Its business rebounded sharply from pandemic lows, and it's now well positioned to perform as an industry leader.
The incredible recovery
Carnival's revenue went to zero during the worst phase of the pandemic, and it borrowed heavily to remain solvent. It had been the cruise industry leader and a market-beating stock before the pandemic, and the likelihood was a return to that status as the world recovered.
Carnival came into fiscal 2023 with $12 billion in annual revenue and a $1.6 billion loss. It exited the year with $21.6 billion in revenue, surpassing pre-pandemic levels, and a $74 million loss, including one quarter with positive generally accepted accounting principles (GAAP) net income.
CCL Revenue (TTM) data by YCharts
Not only is it getting back to where it started, but it's also well positioned to move higher. Management painted a solid picture of growth trends heading into 2024, with its best booked position ever heading into a new year. It has enjoyed healthy bookings despite higher prices, and it's able to pull those bookings at higher prices into 2024, with almost two-thirds occupancy already booked out for the year.
The elevated levels and higher prices are generating higher profitability. Net yields and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) are at or close to 2019 levels, and Carnival is on track to meet its three-year growth goals ahead of schedule. Management is guiding for adjusted EBITDA of $5.6 billion for fiscal 2024, or 30% more than 2023, and net yield up 8.5%.
The fun is just beginning
Don't feel too bad if you missed out on the 2023 gains. Carnival looked risky at this time last year, and you wouldn't have known exactly when to invest to reap these gains.
There's still risk today. Carnival assumed tons of debt and is still carrying more than $30 billion on its balance sheet. It already paid down $6 billion and will fund the remainder with free cash flow. Adjusted free cash flow was $2.1 billion in 2023.
However, the future looks bright for Carnival, and it should go back to its usual performance as the largest cruise operator in the world. It could be a market-beating stock for years and a great option for a value stock to add to a diversified portfolio.
