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Carnival (CCL) Up 11.3% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Carnival (CCL). Shares have added about 11.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Carnival due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Carnival Q4 Earnings & Revenues Surpass Estimates

Carnival reported better-than-expected fourth-quarter fiscal 2019 (ended Nov 30, 2019) results. Both the top and bottom lines surpassed the Zacks Consensus Estimate.

In the quarter under review, it reported adjusted earnings of 62 cents per share, beating the Zacks Consensus Estimate of 51 cents by 21.6% but declining 11.4% from 70 cents reported a year ago. Revenues of $4.78 billion outpaced the consensus mark of $4.6 million by 3.8% and increased 6.7% year over year. This upside can be attributed to strength in passenger tickets, onboard and other, as well as tour and other businesses.

On a constant-currency basis, net revenue yields fell 1.8% year over year. The metric was expected to decline 2-3%. Net on-board and other yields increased 0.9% in constant currency.

Segmental Revenues

Carnival generates revenues from the following businesses: Passenger Tickets, Onboard and Other, as well as Tour and Other. Revenues at the Passenger Tickets business segment increased 2% year over year to $3,171 million. Onboard and Other revenues totaled $1,520 million, up 29.9% year over year. Tour and Other revenues rose 82% year over year to $91 million.

Expenses

Net cruise costs (in constant dollar) per available lower berth day (ALBD), excluding fuel, increased 2.6% from the prior-year quarter. However, the reported figure was better than expected due to cost improvements realized during the quarter and the timing of expenses between quarters. Gross cruise costs (including fuel) per ALBD, in current dollars, rose 6.9% from the year-ago quarter.

Balance Sheet

Carnival exited the fiscal fourth quarter with cash and cash equivalents of approximately $518 million, down from $982 million as of Nov 30, 2018. Trade and other receivables summed $444 million, up from $358 million as of Nov 30, 2018. Long-term debt amounted to approximately $9,675 million.

Cash from operations totaled $1,062 million in the quarter under review. Carnival’s capital expenditure was $1,981 million. It paid out dividend worth $346 million during the quarter.

Fiscal 2020 Guidance

Carnival expects fiscal 2020 adjusted EPS in the range of $4.30-$4.60. Adjusted earnings of $4.40 per share were reported the prior-year quarter. The company expects Voyage disruptions due to weather, a ship delivery delay and U.S. government's policy change on travel to Cuba to impact fiscal 2020 earnings by 12-17 cents.

In constant currency, net revenue yields are expected to be down nearly 1.5% year over year. Also, net cruise costs (excluding fuel) per ALBD are expected to increase 5% from a year ago, with capacity growth of 6.6% in constant currency.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 22.02% due to these changes.

VGM Scores

At this time, Carnival has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Carnival has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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