If you've ever sailed on a cruise ship, seen a documentary about a not-so-bon voyage, or just paid attention to Shaq's growing presence in TV commercials, you know Carnival Corp. (CUK +1.55%) (CCL +1.38%). The country's largest cruise line stock -- by revenue and not market cap -- is coasting these days.
Accelerating growth, a long history of bottom-line beats, and a return to pocket change for shareholders are just some of the reasons why the market is warming up to Carnival's inviting waters again. Let's dive in for a closer look.
Image source: Getty Images.
1. The stock is cheaper than you think
I won't bury the lede: Carnival stock has almost doubled from last year's springtime lows. You would think that this makes the cruising giant behind several popular seafaring brands expensive, but the valuation math might surprise you.
You can buy Carnival for just 11 times what analysts see it delivering in adjusted earnings for the fiscal year that started last month. The multiple drops to 10 if you go out to fiscal 2027. This is a discount to the market, and that's for the market's largest player in a growing travel niche.
NYSE: CCL
Key Data Points
2. You can't beat the beats
Good companies consistently land ahead of Wall Street profit targets. Great companies do the same thing, only by a consistently wide margin. Carnival's on a pretty amazing run since emerging out of the prolonged pandemic shutdown.
| Period | EPS Estimate | Actual EPS | Surprise |
|---|---|---|---|
| Fiscal Q3 2023 | $0.75 | $0.86 | 15% |
| Fiscal Q4 2023 | ($0.13) | ($0.07) | 46% |
| Fiscal Q1 2024 | ($0.18) | ($0.14) | 22% |
| Fiscal Q2 2024 | ($0.02) | $0.11 | 650% |
| Fiscal Q3 2024 | $1.15 | $1.27 | 10% |
| Fiscal Q4 2024 | $0.07 | $0.14 | 94% |
| Fiscal Q1 2025 | $0.02 | $0.13 | 485% |
| Fiscal Q2 2025 | $0.35 | $0.24 | 46% |
| Fiscal Q3 2025 | $1.32 | $1.43 | 9% |
| Fiscal Q4 2025 | $0.25 | $0.34 | 39% |
Data source: Yahoo! Finance. EPS = earnings per share (adjusted).
Beating analyst earnings estimates for 10 consecutive quarters is impressive. Carnival checking in with adjusted net income at least 9% above expectations is spectacular. It almost makes you want to revisit the first point on this list.
Carnival is trading for 11 times what Wall Street pros think it will earn this year, now. Just imagine how high those targets can go if the beats keep coming as fiscal 2026 plays out, suggesting that Carnival is trading for a lot less than 11 times forward earnings today.
3. Moments of momentous momentum
Carnival sets the bar low, and then it clears it with ease. When fiscal 2025 began 13 months ago, the cruise line operator's guidance called for an adjusted profit of $1.70 per share. Every subsequent quarter saw an upward revision. Carnival's adjusted per-share profit for the full fiscal year would go to $1.83, $1.97, and $2.14 through the first fiscal quarters, respectively. It ultimately landed at $2.25 a share.
Even when there's a lull -- like the stock sliding after posting disappointing 3% revenue growth for last year's fiscal third quarter -- the ship didn't leave the port without improving fundamentals on board. The fiscal third quarter was the time when it was only a 9% bottom-line beat.
Thankfully, Carnival recovered three months later. Last month's fourth quarter saw its revenue growth accelerate to 7% on a 39% earnings beat. It was able to call off the loading of lifeboats. Carnival continues to be seaworthy.
4. The ins and outs of payouts
Carnival suspended its quarterly dividend in 2020 amid the COVID-19 crisis. Cruise ships were among the early casualties of the global disease. Well, Carnival reinstated its distributions last month.
The $0.15 quarterly payout per share may not seem like much, but it translates into a reasonable forward dividend yield of 2.1%. More importantly than just returning money to its shareholders for the first time in six years, it's also an encouraging indicator that Carnival feels the turnaround is complete. The business should continue to get better from here.
5. Demand is only getting stronger
Carnival CEO Josh Weinstein offered a strong window for near-term performance at last month's earnings call for its fiscal fourth quarter. Capacity for fiscal 2026 is already roughly two-thirds booked. Customer deposits are 7% higher than they were at this point a year ago, with record booking volumes for the next two years of sailings.
A lot can change in terms of world peace and the global economy, rattling the business. That's out of Carnival's control. All it can do is to continue to serve its customers well enough to keep them coming back -- and, so far, whatever Carnival is doing is working.
