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Why Is Carnival (CCL) Up 10.2% Since Last Earnings Report?

Zacks Equity Research
Imax (IMAX) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

A month has gone by since the last earnings report for Carnival (CCL). Shares have added about 10.2% 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 drivers.

Carnival Q4 Earnings Beat Estimates, Revenues Lag

Carnival has reported mixed fourth-quarter fiscal 2018 results, wherein earning surpassed estimates but revenues lagged the same. Earnings were 70 cents per share, which outpaced the Zacks Consensus Estimate of 69 cents and improved 11.1% year over year.

Revenues of $4,456 million lagged the consensus mark by $4,459 million but increased 4.6% year over year. This year-over-year top-line improvement can be attributed strength in passenger tickets, and onboard and other as well as tour and other businesses.

Net revenue yields rose 3.7% year over year on a constant-currency basis. The upswing was primarily driven by higher net ticket, and net onboard and other yields that increased 2.7% and 6.4%, respectively, in constant currency.

Segmental Revenues

Carnival generates revenues from Passenger Tickets business, and Onboard and Other as well as Tour and Other segments. Revenues at the Passenger Tickets business segment increased 3.4% year over year to $3,236 million. Onboard and Other revenues totaled $1,170 million, up 7% year over year. Tour and Other revenues rose 42.9% year over year to $50 million.

Expenses

Net cruise costs (in constant dollar) per available lower berth day (ALBD), excluding fuel, declined 1.8%. Gross cruise costs (including fuel) per ALBD in current dollars increased 2.4%.

Balance Sheet

Carnival exited the fiscal fourth quarter with cash and cash equivalents of approximately $982 million, up from $395 million as of Nov 30, 2017. Trade and other receivables summed $358 million, up from $312 million in the fourth quarter of fiscal 2017. Long-term debt amounted to approximately $7,897 million.

Cash from operations totaled $1,113 million in the quarter under review. Carnival spent $966 million on capital expenditure and $352 million on dividends in the same period.

First Quarter Fiscal 2019 Outlook

Carnival expects EPS to be 40-44 cents in the fiscal first quarter. Net revenue yields are expected to be flat compared with the prior fiscal year. Net cruise costs (excluding fuel) per ALBD in constant currency for the fiscal first quarter are expected to increase by roughly 2% compared with the prior fiscal year.

Fiscal 2019 Guidance

Carnival expects 2019 EPS to be $4.50 to $4.80 compared with adjusted earnings per share of $4.26 recorded in fiscal 2018.

The company expects full-year net cruise costs (excluding fuel) per ALBD to be up approximately 0.5% compared with the prior fiscal year. Moreover, management expects net cruise revenues to be up 5.5%, with capacity growth of 4.6% and higher net revenue yields by 1%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -8.49% due to these changes.

VGM Scores

At this time, Carnival has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Carnival has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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