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    Carnival Corp (CCL)

    Q1 2024 Earnings Summary

    Reported on Jan 10, 2025 (Before Market Open)
    Pre-Earnings Price$17.03Last close (Mar 26, 2024)
    Post-Earnings Price$16.61Open (Mar 27, 2024)
    Price Change
    $-0.42(-2.47%)

    What went well

    • Brand repeaters were up 9% year-over-year, translating into incremental long-term demand. 
    • New-to-cruise customers are up over 30% versus last year's first quarter, indicating strong success in attracting new guests beyond pent-up demand. 
    • Anticipated uplift from Celebration Key, with benefits from incremental ticket revenue, import spending, and reduced fuel consumption, providing a very healthy ROIC and serving as an incredible asset for future growth. 

    What went wrong

    • Potential financial impact from unexpected events: The company expects up to a $10 million impact on full-year taxes due to the recent incident at the Francis Scott Key Bridge in Baltimore, indicating vulnerability to unforeseen events affecting operations.
    • Increased dry dock expenses: The company confirmed that the first and fourth quarters are expected to have heavy dry dock orders, potentially leading to higher maintenance costs and affecting profitability in those periods.
    • Operational improvements still needed: The CEO acknowledged that "everybody has room to improve across all areas," suggesting that operational efficiencies have not been fully realized, which could impact financial performance.

    Q&A Summary

    1. Per Diem Growth and Yield Guidance
      Q: How is per diem growth expected to perform for the rest of the year?
      A: Management indicated that per diem growth is accelerating and expects it to be up year-over-year every quarter. They are not providing specific numbers but highlighted that the trend of higher per diems has continued into March and is spilling into 2025. The focus remains on increasing per diems alongside occupancy to enhance overall yields.

    2. Investment Grade Path and Ship Orders
      Q: Do new ship orders alter the path to investment-grade status?
      A: The company stated that new ship orders do not change their path to investment-grade metrics by 2026. They are prioritizing debt repayment, having prepaid $1.8 billion so far this year, and expect improved EBITDA to continue reducing debt ratios, even with the planned one to two ships per year starting in 2027.

    3. Occupancy Levels and Expectations
      Q: How should we think about occupancy levels relative to historical norms?
      A: Occupancy has returned to the historical range of 104% to 107%, with the expectation to maintain this range. Management emphasized optimizing for overall yield rather than just occupancy or price, allowing flexibility to achieve the best combination of both.

    4. Secular Demand Trends and Pricing Power
      Q: Is the current demand strength sustainable beyond pent-up demand?
      A: Management believes the demand is sustainable and not just pent-up. Consumers are recognizing the value and experience gap that cruising offers compared to land-based alternatives. Even with increased per diems, cruising remains a strong value proposition, and there is confidence in continued demand and pricing power moving forward.

    5. Onboard Revenue Growth
      Q: Are onboard revenue metrics conservative in guidance, and how are they performing?
      A: Onboard revenue is increasing on both sides of the Atlantic, with a double-digit increase in pre-cruise sales in the first quarter. While there is a mix impact due to European brands' occupancy growth, the company is optimistic about onboard spending and has incorporated this into their guidance.

    6. European Brands Recovery
      Q: How are European brands recovering compared to North American brands?
      A: European brands are experiencing an occupancy jump and are improving in pricing and onboard spending. The significant occupancy growth is primarily in the first half of the year, and all brands are moving positively in these metrics.

    7. 2025 Bookings and New-to-Cruise Strength
      Q: What trends are seen in 2025 bookings and the new-to-cruise category?
      A: Bookings for 2025 show improvement across the board, not just in longer or exotic itineraries. The company has seen over 30% increase in new-to-cruise guests compared to last year's first quarter, indicating successful outreach and marketing efforts.

    8. Impact of Celebration Key on Pricing and Revenue
      Q: What impact will Celebration Key have on pricing and revenue?
      A: Celebration Key is expected to provide an uplift in both ticket sales and onboard spending, contributing to a healthy ROIC for the investment. While specifics are not yet provided, the new destination will offer unique experiences and revenue opportunities starting in 2025.

    9. Business Improvements and Priorities
      Q: What are the current business priorities for further improvement?
      A: The focus is on enhancing commercial operations, including advertising, revenue management, onboard execution, and deployment planning. Continuous improvement in understanding the business and guests is seen as key to driving performance across all brands.

    10. New Ships and Fleet Pricing Strategy
      Q: How do new ships affect pricing and the rest of the fleet?
      A: New ships do receive a pricing premium, but the primary focus is on increasing per diems across the entire fleet. With only three new ships out of a fleet of 95, improving pricing on the existing ships is more impactful for overall performance.

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