Stuck In Rough Waters

It’s been anything but smooth sailing for cruise lines since the pandemic. And that trend is continuing today after Carnival Cruse Lines disappointed investors with its 2023 outlook. 😞

The company’s fiscal first-quarter adjusted loss per share was $0.55 on $4.43 billion in revenues. Both figures topped the expected $0.60 per share loss and $4.32 billion in revenues.

Driving the strong results was a “phenomenal wave season,” where it experienced its highest-ever quarterly booking volumes. Its effort to drive demand appears to be working, as it continues to close the gap relative to its pre-pandemic results (2019).  🛳️

Several other stats worth mentioning:

  1. Passenger-ticket revenue rose 229% from 2019 to $2.87 billion;
  2. Onboarding and other revenues rose 108% from 2019 to $1.56 billion;
  3. Passenger cruise days increased 181% from 2019 to 20.2 million; and
  4. Net per diems per passenger cruise day was up 4.89% from 2019 to $162.96

Cash flow from operations was positive during the current quarter. Executives expect continued growth in cash from operations to drive its debt pay down over time, and the company ended Q1 with $8.1 billion in liquidity.

With that said, the company’s guidance was slightly worse than expected. Executives forecast an adjusted loss of $0.28 to $0.44 per share for fiscal 2023, much wider than the $0.07 loss expected. Net per diems is also anticipated to be above 2019 levels by 1-2%. 🔮

They also expect adjusted non-fuel cruising costs to rise 6.5-7.5% from 2019 levels, up from previous guidance of 5-6%. On a constant-currency basis, estimates rose by 1% to 8.5-9.5%. 📈

While investors are happy to see revenues back on track amid solid travel demand, rising costs remain their primary concern. To pay down its debt and return cash to shareholders, the company must keep some of that record revenue as profits. But, apparently, the market is questioning just how well the company can manage those non-fuel costs if inflation remains elevated.

$CCL shares were down about 5% on the day and have traded in a range near all-time lows for the last nine months. 🔻

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