Melius reiterated a Buy rating and $20.00 price target on Carnival Corporation (NYSE:CCL) on Tuesday, highlighting the company’s improved management capabilities and return to historic employment levels. The analyst highlighted Carnival’s success in rebuilding the booking curve and the absence of underperforming brands, which present an opportunity for further optimization.
Carnival Corporation has successfully navigated the challenges of recent years by rebuilding its booking curve from the ground up. The company’s global diversity has required it to address a number of immediate issues, but with the booking curve now stretched and occupancy rates back to normal, management is able to plan for the future and improve its strategic positioning.
The cruise operator is now focusing on improving returns, particularly for brands such as Costa, Princess and Holland, which have not yet reached the 12% return on invested capital (ROIC) target. The analysis suggests that Carnival is in a strong position to capitalize on self-help opportunities to outperform the broader industry.
According to the Melius analyst, Carnival’s current position is advantageous because all its brands are performing well from an accounting perspective. This allows the company to focus on those brands that have been lagging in returns, with the intention of boosting their performance to meet the company’s financial goals.
The analyst’s outlook for Carnival is positive, as the company has not yet fully realized its potential. With the ability to manage inventory and optimize returns, Carnival is expected to continue its improvement trajectory and capitalize on the opportunities available in the industry.
In other recent news, Carnival Corporation has made notable strides in its financial performance and strategic planning. The cruise operator’s second-quarter adjusted EBITDA beat consensus estimates, reaching $1.2 billion. The company also reported adjusted earnings per share of $0.11 for the second quarter of 2024, beating the loss analysts had expected. Carnival’s revenue for the quarter was $5.8 billion, a significant increase of 31% compared to the same period in 2023.
Citi and Jefferies maintained their Buy rating on Carnival stock, while Morgan Stanley maintained their Underweight rating. Bank of America analysts noted a slight decline in prices for the ocean cruise markets, but highlighted positive pricing dynamics for Carnival and Norwegian Cruise Line Holdings.
Carnival raised its profit forecast for 2024, forecasting adjusted earnings per share of about $1.18. This update follows strong demand for cruise holidays and strong bookings for 2025. In a strategic move to increase guest capacity, Carnival plans to integrate P&O Cruises Australia into Carnival Cruise Line by March 2025, resulting in the retirement of P&O Cruises Australia brand.
Insights from InvestingPro
As Carnival Corporation (NYSE:CCL) heads into calmer waters, Melius’ optimistic outlook aligns with some key metrics and insights from InvestingPro. The company’s market capitalization stands at $22.45 billion, reflecting its notable presence in the cruise industry. Carnival’s revenues have seen a notable growth of 50.66% over the trailing twelve months as of 1Q24, which underlines the company’s successful recovery and its potential for further growth.
A tip from InvestingPro points out that Carnival is expected to be profitable this year, which is in line with the company’s current P/E ratio of 54.95, which signals investor confidence in near-term earnings potential. Furthermore, the PEG ratio of 0.47 suggests that the stock may be undervalued relative to its earnings growth prospects. These indicators could be especially important for investors looking to capitalize on Carnival’s turnaround story.
For those looking for a more detailed analysis, InvestingPro offers additional insights into Carnival’s financial health and market performance. Using the exclusive coupon code PRONEWS24, readers can access these insights at a discounted price on an annual or two-year Pro and Pro+ subscription. There are currently 9 more InvestingPro tips available that can provide a deeper understanding of Carnival’s strategic positioning and future potential.
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