Carnival Corp’s Profits On the Rise
Carnival Corp has raised its annual profit forecast for the second time this year, thanks to higher itinerary prices and a sustained demand for cruise holidays among Americans. This has invigorated the company’s U.S.-listed shares, which surged by 6.71% to $17.48, despite having experienced an 11% decline earlier in the year.
The year 2024 has been a stellar one for cruise operators, marked by record-breaking booking volumes. This has allowed companies like Carnival to increase ticket prices, effectively balancing out elevated operating costs. Travelers are eager to explore new experiences and enjoy affordable yet entertaining vacations, creating a perfect storm for the cruise industry.
Josh Weinstein, Carnival’s CEO, highlighted the momentum in bookings. “While still early, the cumulative advanced booked position for full year 2025 is even higher than 2024 in both price (in constant currency) and occupancy,” Weinstein noted.
Carnival reported an all-time high in total customer deposits during the second quarter, reaching $8.3 billion—surpassing the previous record by $1.1 billion. The cruise operator also posted a second-quarter profit of 7 cents per share, despite analysts’ prediction of a 2-cent loss per share, according to leading global financial market data provider the LSEG foundation.
However, the company’s net debt remains a concern at $27.7 billion. Derren Nathan, an equity analyst at Hargreaves Lansdown, pointed out that while the second quarter typically generates the most cash, there might not be significant movement in reducing this debt within the year. Despite this, Carnival managed to prepay $1.6 billion of debt during the second quarter, fueled by strong liquidity and improved financial performance.
The cost per available lower berth day—a metric indicating the passenger capacity of a ship while in service—rose by 4% during the second quarter. Nevertheless, Carnival has revised its 2024 adjusted profit per share forecast to approximately $1.18, up from the earlier estimate of 98 cents.
Carnival’s rivals, Royal Caribbean Group and Norwegian Cruise Line, have similarly adjusted their annual profit targets upwards in recent months.
Carnival Corp’s renewed financial health and optimistic profit forecasts signal a robust recovery for the cruise industry. As travelers continue to seek relatively affordable and exciting vacation options, cruise operators are well-positioned to capitalize and ensure profitable voyages ahead for both companies and their investors.
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7/21/2024
