Carnival Corp's guidance will be the focus of investor attention when the cruise ship operator reports its second-quarter financial results on Monday, June 26, 2023, after its rival Royal Caribbean Cruises (RCL) recently raised its own outlook, according to analysts at UBS.
The analysts pointed out that RCL raised its 2023 financial year yield by 400 basis points to 6.25% to 7.25% yield growth compared to 2019.
Carnival's guidance implies its 2023 financial year yield coming in between negative 6% and negative 4% compared to 2019 levels, including about 200 basis points of FX drag.
The analysts highlighted that there are two important differences between the two companies. “One is that RCL’s original financial year guidance came before the end of wave season, while CCL’s last guidance for 2023 already had the benefit of full visibility from wave season,” they wrote.
“The second factor that suggests CCL may not have the same guidance raise coming is its sourcing. CCL recovery relative to 2019 has been about a quarter behind RCL, partly due to the difference in fiscal period, but also due to sourcing.”
The analysts believe, even if it’s not a 400 basis points rise like RCL, that there will be an upside to Carnival’s guidance.
They also believe price growth is possible given the significantly wider gap between cruise and land-based hotel pricing.
“CCL notes that RCL has out-marketed them, but CCL believes they can invest in more marketing while still staying below RCL’s level,” they wrote.
“CCL is also increasing its pre-sold onboard revenue, which will grow total onboard revenue. Some of CCL’s nine brands are just ramping up with non-refundable fares and are also closing the digital marketing gap.”
For 2Q, the UBS analysts expect Carnival to report a loss per share of $0.38, while the Street’s expectation is for a loss per share of $0.35 per Zacks Consensus Estimate. They, on average, expect revenue for the quarter of $4.43 billion.
The UBS analysts have a ‘Buy’ rating and a $12 price target on the stock, which they said are under review. Carnival shares are currently trading at $16.07.
Contact the author at emily.jarvie@proactiveinvestors.com
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