Carnival Corp. (CCL), among the largest cruise companies in the world, is starting to see a turnaround after several years during which the COVID-19 pandemic shuttered most of the cruise industry. In May, Carnival became the first major U.S. cruise line to return its entire fleet to operation. And analysts now estimate Carnival's revenue will rise more than seven-fold in 2022 compared to a year ago. But major challenges remain. Despite the improvement, Carnival's revenue this year is expected to be far below annual levels before the pandemic, and analysts expect continuing large net losses.
- Analysts estimate adjusted EPS of -$1.18 vs. -$1.80 in Q2 FY 2021.
- Room occupancy is expected to rise significantly YOY, but it still will be below pre-pandemic levels.
- Revenue is expected to continue its rapid recovery as cruise operations resume.
Investors will watch to see how rapidly Carnival is recovering when the company reports Q2 fiscal year (FY) 2022 earnings on June 24, 2022. Analysts predict that quarterly adjusted losses per share will narrow year-over-year (YOY). Carnival also is expected to post its highest quarterly revenue since Q1 FY 2020, just before the pandemic exerted it full impact on the industry.
Investors will also be focused on Carnival's room occupancy rate, a measure of the amount of available passenger capacity, or cabins, being utilized. In Q2 FY 2022, the occupancy rate is expected to rebound dramatically, although not to pre-pandemic levels.
Shares of Carnival stock trailed the broader market throughout the last year. They traded largely sideways from July through November 2021, and again in March and April 2022. But despite this, Carnival shares have generally drifted downward in the past year, followed by a sharp decline in the last three months. As of June 23, Carnival stock has provided a 1-year trailing total return of -66.6%, well behind the S&P 500's total return of -11.4%.
Carnival Earnings History
Carnival's adjusted earnings per share (EPS) history has been tumultuous since the start of the pandemic. The company has failed to post positive EPS in any quarter since at least Q1 FY 2020. The widest loss per share of -$3.30 came in Q2 FY 2020. Since then, the company has gradually narrowed those losses. It hovered between -$1.70 and -$1.80 in each quarter of FY 2021 before narrowing slightly to -$1.66 in Q1 FY 2022. Now, analysts expect additional, modest improvement. They estimate an adjusted loss per share of -$1.18 for Q2 FY 2022. This would be smallest quarterly adjusted loss per share since the start of the pandemic.
The company's revenue stream has shrunk dramatically during much of the pandemic compared to FY 2019, the most recent healthy year. In Q1 FY 2020, quarterly revenue was $4.8 billion. It then plunged to $740 million in Q2 FY 2020 before dropping even further in subsequent quarters. The company's revenue did not exceed $49 million in the four quarters between Q3 FY 2020 and Q2 FY 2021. Starting in Q3 FY 2021, revenue began to improve, reaching $1.6 billion in Q1 FY 2022. Analysts estimate this trend will continue as revenue reaches $2.8 billion in Q2 FY 2022. However, this remains drastically below revenue levels pre-pandemic.
|Carnival Key Stats|
|Estimate for Q2 FY 2022||Q2 FY 2021||Q2 FY 2020|
|Adjusted Earnings Per Share ($)||-1.18||-1.80||-3.30|
|Room Occupancy Rate (%)||72.1||32.2||96.1|
Source: Visible Alpha
The Key Metric
As mentioned above, investors will also be watching Carnival's room occupancy rate. The occupancy rate provides a measure of how well a cruise line is utilizing its total passenger capacity. It is calculated by dividing the number of passengers during the relevant period by total passenger capacity over the same period. Because most of a cruise line's costs are fixed, with crew and ship operating costs not changing significantly regardless of how many passengers are on board, it benefits Carnival to try to fill ships up as much as possible. Passenger capacity assumes that each cabin accommodates two passengers, which means that an occupancy rate in excess of 100% is an indication that some cabins are filled with more than two passengers.
Carnival's room occupancy rate was in excess of 100% each quarter of FY 2019 as well as Q1 FY 2020. In Q2 FY 2020, when the pandemic's impact widened, the occupancy rate dropped to 96.1%. It fell to its lowest point in Q1 FY 2021, when it reached just 16.0%. Since that time, it has improved, although not steadily. Occupancy reached 58.4% in Q4 FY 2021 and then slipped to 54.0% in Q1 FY 2022. Analysts estimate that room occupancy will rise sharply to 72.1% in Q2 FY 2022. While that occupancy would be the strongest level in eight quarters, it still would be well below room occupancy rates prior to the pandemic.
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Visible Alpha. "Financial Data."
Carnival Corp. "CARNIVAL CORPORATION & PLC PROVIDES FIRST QUARTER 2022 BUSINESS UPDATE."