Carnival Corporation & plc is the largest global cruise company and one of the largest leisure travel companies, operating a portfolio of world-class cruise lines . The company offers a broad range of cruise products and services catering to vacationing guests of various ages, backgrounds, and interests, allowing them to penetrate large addressable customer segments . Their cruise brands are classified into contemporary, premium, and luxury experiences, each targeting different consumer psychographics and vacation needs . In 2023, Carnival achieved record revenues of $21.6 billion, driven by strong demand across all brands, improvements in ticket prices, and reaching historical occupancy levels . The company has been focusing on increasing consumer awareness and demand for cruise vacations through comprehensive marketing and advertising programs, which have successfully attracted new-to-cruise and new-to-brand guests .
- Contemporary Cruise Lines - Offers affordable and family-friendly cruise experiences with a focus on fun and entertainment, appealing to a broad audience.
- Carnival Cruise Line - Known for its vibrant atmosphere and diverse onboard activities.
- Costa Cruises - Provides a European-style cruising experience with a focus on Italian hospitality.
- AIDA Cruises - Targets German-speaking guests with a casual and relaxed cruising environment.
- Premium Cruise Lines - Delivers a more refined and sophisticated cruise experience with enhanced services and amenities.
- Holland America Line - Offers classic cruising with a focus on enriching experiences and cultural immersion.
- Princess Cruises - Known for its innovative ships and personalized service, appealing to seasoned travelers.
- P&O Cruises (UK) - Caters to British guests with a blend of traditional and contemporary cruising experiences.
- P&O Cruises (Australia) - Focuses on the Australian market with tailored itineraries and onboard offerings.
- Luxury Cruise Lines - Provides an ultra-luxurious cruise experience with personalized service and exclusive amenities.
- Cunard - Offers a traditional and elegant cruising experience with a focus on luxury and heritage.
- Seabourn - Known for its intimate ships and exceptional service, catering to discerning travelers.
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What went well
- 1. Strong Yield Growth and Operational Improvements*: Carnival has achieved almost 10% yield growth on same ships over the prior year, driven by restructuring, getting the right leaders in place, and investments in marketing and revenue management tools. This significant organic improvement indicates substantial headroom for future growth. ,
- 2. Positive Outlook with Investment in Destinations and Onboard Spending*: The upcoming opening of Celebration Key in mid-2025 is expected to drive demand and onboard spending. Carnival is focusing on increasing pre-cruise spending, which opens up additional spending opportunities onboard, with significant runway to grow onboard revenue. ,
- 3. Improving Financial Position and Margin Expansion*: Carnival is on track to achieve investment-grade leverage metrics by 2026, targeting net debt to EBITDA of around 3.5x, through continued debt reduction and strong EBITDA growth. Additionally, yield improvements are expected to outpace cost increases, leading to margin expansion and stronger financial performance. , ,
What went wrong
- Potential Deceleration in Key Revenue Metric Growth: There are indications that per diems growth may slow down in 2025. Despite achieving over 5% increase in per diems in Q4 2024, the guidance for 2025 shows a yield increase of only 4.2%, which is lower than prior growth. Management did not provide a clear answer when asked about less robust pricing, suggesting possible concerns over sustaining pricing power.
- Elevated Leverage Levels Remain a Concern: Carnival's leverage ratio stands at 4.3x net debt-to-EBITDA, and while the company aims to reach investment-grade metrics of 3.5x, management acknowledged they do not have a target closer to 2x. This suggests that high debt levels may persist, potentially limiting financial flexibility and increasing financial risk.
- Uncertainty Over Cost Inflation and Efficiency Gains: The company expects cruise costs excluding fuel per ALBD to increase by 3.7% in 2025. Management admitted that the magnitude of efficiency initiatives is uncertain and that actual inflation could vary, stating, "There's only one thing I know about every forecast, it's wrong. I just don't know by how much and in what direction." This uncertainty could impact margins if costs rise more than expected.
Q&A Summary
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Yield Guidance and Conservatism
Q: Is the 2025 yield guidance conservative given strong bookings?
A: Josh Weinstein acknowledged that while last year's outperformance was special, they are giving guidance based on what they know. They expect yields to increase by 4% in 2025, primarily driven by price rather than occupancy. He emphasized that they aim to optimize revenue and work hard to exceed expectations. -
Long-Term Targets and SEA Change
Q: Will you set new long-term financial targets after achieving SEA Change goals early?
A: Josh Weinstein indicated that once they reach their SEA Change targets, they plan to establish new long-term goals. He appreciates having longer-term targets to motivate the team and guide investors. They are close to achieving their ROIC target, needing about $100 million more in operating income, and acknowledged that the carbon reduction target will be more challenging. -
Debt Refinancing Impact on EPS
Q: Could debt refinancing significantly lower interest expense in 2025?
A: David Bernstein confirmed opportunities to refinance $3 billion in high-interest debt callable next year. While they included some savings in their forecast, successful refinancing could lower interest expense further, potentially providing upside to earnings. -
Booking Curve and Pricing Robustness
Q: Is pricing less robust compared to last year?
A: Josh Weinstein noted tougher comparisons but stated that brands are at higher occupancy and price points across all quarters. He believes they are in a more stable position and have given their view on yields accordingly. -
Cost Side and Efficiency Opportunities
Q: What could lead to better-than-expected cost performance?
A: David Bernstein highlighted ongoing efforts to find efficiencies and manage inflation, which they built into their guidance at less than 3%. He mentioned that while forecasting exact timing is challenging, they are constantly working to improve cost management, which could lead to better results. -
Mexico Passenger Charges Impact
Q: Will new Mexican passenger charges affect itineraries?
A: Josh Weinstein does not believe the proposed tax is a done deal and is engaging with the Mexican government to address concerns. If it were implemented starting July 2025, it would impact less than 5% of their itineraries, and they have not included any related costs in their forecast. -
Leverage and Investment-Grade Targets
Q: Is reaching 2x leverage a long-term goal?
A: Josh Weinstein stated that while they aim to achieve investment-grade metrics, specifically targeting 3.5x leverage, returning to a 2x level is not their current goal. They are focused on strengthening the balance sheet and will consider the appropriate level of leverage over time. -
Celebration Key's Impact on Yields
Q: How much does Celebration Key contribute to yield guidance?
A: Josh Weinstein explained that Celebration Key accounts for only 5% of total sailings in 2025, becoming more meaningful in 2026 at 15%+. While it's included in their guidance, the current impact on yields is limited, though they are seeing the expected premium in bookings. -
Wave Season Strategy
Q: How are you balancing 2025 bookings with future demand?
A: Josh Weinstein mentioned that they are actively selling cruises for 2025 and 2026, with record bookings for 2026. Each brand is approaching wave season differently, but they all use promotions to drive interest during this critical period while optimizing the booking curve. -
Red Sea Impact on 2025 Results
Q: How will the absence of Red Sea itineraries affect 2025?
A: Josh Weinstein noted that the prior year's Red Sea disruption cost them less than $100 million. For 2025, they proactively adjusted itineraries, selling cruises without Red Sea destinations. As a result, there won't be a significant bounce-back in 2025, and normalization is expected when comparing 2026 to 2025.
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Given that cost savings have come from "hundreds of small items" like crew travel and port savings rather than active cost reductions, how sustainable are these savings, and can you replicate or enhance them in the future?
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With strong demand attributed to improved commercial execution rather than pent-up demand, how do you plan to maintain this momentum in the face of potential macroeconomic headwinds or shifts in consumer spending patterns?
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As competitors expand into key markets like Galveston, how does Carnival plan to defend market share and maintain a competitive edge against companies that may not have the same reporting requirements or financial constraints?
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Given the plans to develop Half Moon Cay without adding entertainment attractions like water parks, how do you intend to enhance the guest experience while preserving its natural beauty, and what is the expected return on investment for these enhancements?
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Considering the increased advertising spend and your plan to make decisions on this in the coming months, how will you evaluate the return on investment of your marketing efforts, and what adjustments might you make if market conditions change?
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: Q4 2024 and FY 2024
- Guidance:
- Net Income: $1.76 billion for FY 2024, a $210 million improvement over June guidance .
- Yield Growth: 5% for Q4 2024 over the prior year .
- Cruise Costs Without Fuel per ALBD: Up 8% for Q4 2024; full year improvement to approximately 3.5% .
- EBITDA: $6 billion for FY 2024, with net debt-to-EBITDA leverage approaching 4.5x .
- ROIC: Expected to end FY 2024 at 10.5% .
- Capacity Increase: 0.7% forecasted for 2025 compared to 2024 .
- Dry Dock Days: 688 days in 2025, a 17% increase versus 2024 .
- Advertising Expenses: Elevated in Q4 2024, similar to Q1 2024 .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: Q3 2024 and FY 2024
- Guidance:
- Yield Guidance: 8% for Q3 2024; full year improvement of approximately 10.25% .
- Net Income Guidance: $1.55 billion for FY 2024, a $275 million improvement over March guidance .
- Net Interest Expense: Improvement of $60 million for FY 2024 .
- Free Cash Flow: $1.3 billion generated in Q2 2024 .
- EBITDA Guidance: $5.83 billion for FY 2024, with net debt-to-EBITDA leverage approaching 4.5x .
- Per Diem Growth: Mid-single-digit growth expected through the year .
- Customer Deposits: Over $8 billion, surpassing the previous year's record by $1.1 billion .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024
- Guidance:
- Yield Guidance: 10.5% for Q2 2024; full year improvement of 9.5% .
- Capacity Increase: 4.5% for FY 2024 compared to 2023 .
- Net Income Guidance: $1.28 billion for FY 2024, an $80 million improvement over December guidance .
- Cost Improvements: Over $50 million improvement excluding fuel .
- Impact of Red Sea Rerouting: Significant impact in Q2 2024, remainder in Q4 2024 .
- EBITDA Guidance: $5.63 billion for FY 2024 .
- Impact of Temporary Change in Home Port: Up to $10 million impact not included in guidance .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Net Income and EBITDA: $1.2 billion net income and $5.6 billion EBITDA for FY 2024 .
- ROIC: 9% for FY 2024, aiming for 12% by 2026 .
- Capacity Increase: 5.5% for FY 2024 compared to 2023 .
- Net Yield Improvement: 8.5% for FY 2024 .
- Occupancy Levels: Return to historical levels for FY 2024 .
- Cruise Costs: Up 4.5% for FY 2024 .
- Fuel Consumption: Decrease by 4% per ALBD .
- Interest Expense: $100 million less than 2023 .
- Debt Maturities: $2.1 billion scheduled, with $2.3 billion in export credits planned .
- Booking Levels: Nearly 2/3 of 2024 business already booked at higher prices .
Competitors mentioned in the company's latest 10K filing.
- Royal Caribbean Group - Principal cruise competitor, part of the group representing approximately 80% of the cruise industry capacity as of December 31, 2023 .
- Norwegian Cruise Line Holdings, Ltd. - Principal cruise competitor, part of the group representing approximately 80% of the cruise industry capacity as of December 31, 2023 .
- MSC Cruises - Principal cruise competitor, part of the group representing approximately 80% of the cruise industry capacity as of December 31, 2023 .
Recent developments and announcements about CCL.
Financial Actions
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Repricing Amendments:
- Carnival Corporation entered into two repricing amendments on January 13, 2025:
- 2027 Repricing Amendment: Covers approximately $700 million of first-priority senior secured term loans maturing in 2027.
- 2028 Repricing Amendment: Covers approximately $1.75 billion of first-priority senior secured term loans maturing in 2028.
- Carnival Corporation entered into two repricing amendments on January 13, 2025:
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Interest Rates:
- Both loans bear interest at a rate equal to SOFR (Secured Overnight Financing Rate) with a 0.75% floor, plus a margin of 2.00%.
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Purpose:
- The repricing is part of Carnival's ongoing efforts to reduce interest expenses, with expected annualized savings of approximately $18 million.
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Balance Sheet Impact:
- The repriced loans remain on the balance sheet as liabilities but at a lower interest cost, which could improve net income and cash flow.
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Financial Health:
- The reduction in interest expenses may enhance Carnival's ability to service its substantial debt, which is critical given its high leverage.
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Risk Considerations:
- While the repricing reduces interest costs, the company still faces risks associated with its significant debt levels, as highlighted in its risk disclosures.
Debt Issuance
Carnival Corporation & plc (CCL) has entered into significant financial obligations through repricing amendments to its term loan agreements.
Details of the Financial Obligation
Potential Effects on Financial Health
This development reflects Carnival's strategic financial management to optimize its debt structure and reduce costs, which is crucial for its long-term financial stability.
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Financial Reporting
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Revenue and Profit Performance: CCL reported a strong finish to the year with record revenues and a significant improvement in net income, which exceeded expectations by over $125 million. The full-year revenue reached an all-time high of $25 billion, with a yield increase of 11% driven by higher prices and strong onboard spending .
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Management’s Forward Guidance: For 2025, CCL expects yield growth to exceed 4%, with continued strong demand and higher ticket prices. The company is also focusing on maintaining investment-grade leverage metrics and expects to deliver over $2.3 billion in net income for the year .
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Market Conditions and Strategic Initiatives: CCL is optimistic about its strategic initiatives, including the introduction of Celebration Key, a new exclusive destination expected to enhance guest experiences and drive returns. The company is also investing in non-new-build projects to support brand growth and improve returns .
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Analyst Questions and Management Responses: Analysts inquired about various topics, including the impact of Celebration Key on yields, cost management strategies, and the sustainability of organic growth. Management highlighted the importance of strategic investments and operational efficiencies in driving future growth and maintaining competitive pricing .
Earnings Call
The company CCL recently held its fourth quarter 2024 earnings call, where several key points were discussed:
Overall, CCL is focused on leveraging its strong brand portfolio, optimizing yields, and enhancing onboard spending to sustain its growth trajectory into 2025 and beyond.
Earnings Report
Carnival Corporation & plc has released its earnings results for the fourth quarter and full year 2024, showcasing a record-breaking financial performance. The company reported full year revenues of $25 billion, marking an increase of over 15% compared to the previous year, driven by strong demand across its cruise lines . The net income for the year was $1.9 billion, with an adjusted net income outperforming previous guidance by over $130 million .
For the fourth quarter of 2024, Carnival achieved a net income of $303 million, a significant improvement from a net loss of $48 million in the same quarter of 2023. The adjusted net income for the quarter was $186 million, surpassing September guidance by $126 million, attributed to higher ticket prices and onboard spending .
The company also reported a record fourth quarter adjusted EBITDA of $1.2 billion, which was 29% higher than the previous year . Total customer deposits reached a fourth quarter record of $6.8 billion, reflecting growth in both ticket prices and pre-cruise onboard sales .
Looking ahead, Carnival expects a 20% earnings growth in 2025, with adjusted net income projected to be approximately $2.3 billion. The company anticipates adjusted EBITDA to reach $6.6 billion, achieving its 2026 SEA Change target one year in advance .
Carnival's Chief Executive Officer, Josh Weinstein, highlighted the company's strong pricing strategy and operational execution as key factors in their financial success, setting the stage for continued growth in 2025 .