Carnival Shares Soar as Cruise Operator Sees Brighter Outlook

Carnival Shares Soar as Cruise Operator Sees Brighter Outlook

Key Points:

  • Carnival, the cruise operator, has reported a third-quarter profit, defying previous loss projections, driven by higher ticket prices and strong demand.
  • Cruise operators like Carnival have successfully raised ticket prices while remaining more cost-effective than hotels, appealing to younger travelers seeking experiential vacations.
  • Despite the positive earnings, Carnival’s shares faced a 4.7% decline due to concerns about rising fuel costs and adverse currency exchange rates in the upcoming fourth quarter.

Sep.29 :Cruise operator Carnival (CCL.N) announced on Friday a more optimistic annual outlook, with a smaller expected loss than previously projected. In the third quarter, Carnival reported a profit, thanks to increased ticket pricing and strong demand that managed to counterbalance the impact of rising fuel costs.

Cruise operators like Norwegian Cruise Lines (NCLH.N) and Royal Caribbean (RCL.N) have successfully raised ticket prices while remaining a cost-effective choice compared to hotels. This strategy has attracted younger travelers who prefer investing in experiences over expensive gadgets and furniture.

Carnival reported that they have welcomed over 2.5 million first-time cruise guests this year, marking a remarkable surge to 170% of the previous year’s levels during the third quarter. This surge in new cruisers helped boost the company’s occupancy levels, reaching 109% in the quarter, a return to pre-pandemic levels.

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However, despite the positive news, Carnival’s shares experienced a 4.7% decline. The company projected an unfavorable net impact of $130 million in the fourth quarter due to higher fuel prices and adverse currency exchange rates. Notably, unlike other major cruise operators, Carnival does not hedge against oil price volatility.

Carnival’s CFO, David Bernstein, stated during a post-earnings call that they anticipate adjusted cruise costs (excluding fuel) to be at the upper end of their previous guidance range, though somewhat offset by fuel efficiency improvements. Last year, the company upgraded its global fleet of ships to incorporate technologies aimed at reducing fuel consumption.

This year, cruise pricing is notably 35% to 40% cheaper than leisure hotels, a significant increase compared to the 20% difference observed in 2019, as noted by Redburn Atlantic analyst Alex Brignall. This affordability has attracted a broader demographic, including younger travelers, alongside the traditional cruise clientele of affluent older individuals.

Carnival reported a third-quarter profit of $1.07 billion, or 79 cents per share, a significant turnaround from the $770 million loss, or 65 cents per share, recorded in the previous year. Furthermore, their quarterly revenue of $6.9 billion exceeded expectations, surpassing estimates of $6.69 billion, according to LSEG data, and also achieving a record high.

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Maria Silva, a graduate of UCLA in Journalism, is the voice for the voiceless. Her dedication to investigative reporting and her ability to uncover hidden truths make her an asset to the team. Maria's articles often shed light on critical social issues, providing a platform for change. Her well-crafted narratives keep you engaged and informed on the trending news of the day.

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