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What to Look For From CCL

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Key Takeaways

  • Analysts estimate adjusted EPS of -$1.71 vs. $0.22 in Q1 FY 2020.
  • Occupancy rate is expected to fall drastically YOY.
  • Revenue is expected to plunge amid ongoing health risks related to COVID-19.

Carnival Corp. (CCL), the world’s largest cruise company, is operating with a reduced fleet due to the COVID-19 pandemic even as the global vaccine rollout provides hope for a recovery. While Carnival may bring some ships back into service by the end of the year, Chief Executive Officer Arnold Donald says that it is likely to take until 2023 to fully recover. In the near term, Carnival’s cruise operations remain suspended in major regions, including the U.S. and Australia.

Investors will be looking for any signs that the pandemic’s fallout is easing when Carnival reports earnings on April 7, 2021 for Q1 FY 2021. The company’s fiscal year ended Nov. 30, 2020, and its fiscal first quarter ended in February. The news may not be encouraging. Analysts expect the company to report its fourth consecutive quarterly loss and fourth straight quarter of declining revenue.

Investors also will focus on Carnival’s occupancy rate, a measure of the amount of passenger capacity, or rooms, being utilized. The entire cruise industry has suffered from plummeting occupancy rates amid the pandemic. But they may start to rebound as the health risks of the virus begin to subside. The Centers for Disease Control and Prevention are currently advising those who have not been fully vaccinated to avoid travel and all non-essential trips should be avoided. Analysts expect Carnival’s occupancy rate to be down by more than half compared to the year-ago quarter, but up slightly from the final quarter of FY 2020.

Shares of Carnival have dramatically outperformed the broader market over the past year. Some of that outperformance is due to the stock’s rebound from a much deeper plunge than the rest of the market during the pandemic-induced crash that took place early last year. But some of the outperformance, especially since late October, has been fueled by investor optimism about the potential positive impact of COVID-19 vaccines. Vaccines are now being administered to millions of people in the U.S. and globally. Carnival’s shares have provided a total return of 175.3% over the past 12 months, well above the S&P 500’s total return of 53.1%.


Source: TradingView.

The stock has risen during the past five months despite Carnival’s deteriorating financial results. The company reported an adjusted loss per share of $2.02 in Q4 FY 2020, which was its third consecutive quarter of adjusted losses but smaller than what analysts were expecting. Quarterly revenue fell 99.3%, marking the third consecutive quarter of declines. In its preliminary earnings report for Q4 FY 2020, issued in the first half of January, Carnival noted that the pandemic has had, and is expected to continue to have, a significant impact on its financial condition and operations.

In Q3 FY 2020, Carnival reported an adjusted loss per share of $2.19. However, it was not as steep as the second quarter’s adjusted loss of $3.30 per share. Revenue for the third quarter plunged 99.5% compared to the same three-month period a year ago. The company announced that it was accelerating the removal of 18 of its less efficient ships from its fleet amid the pandemic. It also noted that after pausing its guest cruise operations in mid-March, it resumed limited guest cruise operations in early September.

Analysts expect Carnival to report another adjusted loss in Q1 FY 2021, which would mark the fourth consecutive quarter of adjusted losses. Revenue is expected to decline 98.4% compared to the year-ago quarter, the fourth straight quarter of falling revenue. Also notable, Q1 would mark the third straight quarter during which the company posted virtually zero revenue, reflecting the short-term collapse of business for Carnival and the broader cruise ship industry. For full-year FY 2021, analysts are currently forecasting an adjusted loss per share of $5.60, which would be the company’s second consecutive annual adjusted loss. Annual revenue is expected to fall 33.9% following a 73.1% annual decline in FY 2020.

Carnival Key Metrics
  Estimate for Q1 2021 (FY) Q1 2020 (FY) Q1 2019 (FY)
Adjusted Earnings Per Share ($) -1.71 0.22 0.49
Revenue ($B) 0.08 4.8 4.7
Occupancy Rate (%) 43.0 104.3 104.8

Source: Visible Alpha

As mentioned above, investors will also be watching Carnival’s 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. 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 occupancy rates have fallen dramatically amid the pandemic. Before dipping to 96.1% in Q2 FY 2020, the company’s occupancy rate had not fallen below 103.6% since at least Q2 FY 2017. It plunged to as low as 40.0% in Q4 FY 2020, a full 64 percentage points below its level in the same quarter a year earlier. Analysts expect Carnival to report an occupancy rate of 43.0% in Q1 FY 2021. That would be a slight improvement from the final quarter of FY 2020, but still down drastically from the year-ago quarter. While that figure may improve as the vaccine rollout gains steam, it’s unclear how fast the occupancy rate will return to normal levels at Carnival.

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