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Carnival (CCL) Announces Q2 Business Update, Stock Down

Carnival Corporation & plc CCL reported second-quarter fiscal 2021 financial numbers. Despite reporting strong booking trends and improved cash burn rate, company’s shares declined 2.5% during trading hours on Jun 24.

Negative investor sentiments were witnessed as management was unable to provide timing to reach breakeven levels, pertaining to costs related to resumption of operations and seasonality.

A glimpse of the company’s price trend reveals that Carnival has underperformed the industry so far this year. The stock has gained 26.8% compared with the industry’s 30.1% growth.

Zacks Investment Research
Zacks Investment Research

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Q2 Financials

During fiscal second quarter, the company reported adjusted net loss of $2 billion at par with the previous quarter’s levels.

The company ended the quarter with cash and cash equivalents of $9.3 billion. The company announced that it has enough liquidity to return to full operation. It further added that it will pursue refinancing opportunities to lower interest expenses and extend maturities.

Moreover, average monthly cash burn in the first half of 2021 came in at $500 million, down from the previously-projected figure of $550 million. The improvement was primarily driven by the timing of proceeds from ship sales and working capital changes.

Bookings Update

During the second quarter, booking volumes for all future cruises increased 45% compared with the prior quarter. The company stated that cumulative advanced bookings for full year 2022 are ahead of a very robust 2019 as of May 31, 2021. These bookings were achieved by negligeable advertising and marketing.

In this regard, Carnival’s president and chief executive officer Arnold Donald, stated, "Despite our minimal advertising spend, we continue to experience an acceleration in booking trends globally, including capturing significant latent demand for our new sailings this summer. This strong demand affirms confidence in our future. In addition, customer deposits grew this past quarter, a significant milestone on our path to resumption."

Meanwhile, total customer deposits as of May 31, 2021 came in at $2.5 billion compared with $2.2 billion as of Feb 28, 2021.

2021 Outlook

The company refrained from providing earnings guidance for fiscal 2021 due to the pandemic. However, it expects phased resumption of cruise operations to have a material impact on all aspects of its business, including the company's liquidity, financial position and results of operations. Going forward, the company anticipates to report a net loss on both U.S. GAAP and adjusted basis for the third quarter and full year ending Nov 30, 2021.

Zacks Rank & Key Pick

Carnival — which shares space with Norwegian Cruise Line Holdings Ltd. NCLH and Royal Caribbean Group RCL in the Zacks Leisure and Recreation Services industry — carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock in the same space is Camping World Holdings, Inc. CWH, which sports a Zacks Rank #1.

Camping World Holdings’ 2021 earnings are expected to surge 51.4%.

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