Carnival (CCL +7%) is enjoying a significant boost today after reporting a strong Q2 performance, which included record numbers. This positive news is lifting not only the cruise line industry, with rivals Norwegian Cruise Line Holdings (NCLH, Financial) and Royal Caribbean (RCL, Financial) seeing gains, but also the broader travel sector. Companies like Expedia Group (EXPE, Financial), Airbnb (ABNB, Financial), and Booking Holdings (BKNG, Financial) are all experiencing positive price action.
The broad uplift in the travel market is well-founded. Carnival's Q2 report highlighted a sustained demand for experiences over material goods. The company does not foresee this demand waning soon, emphasizing that it is not just pent-up demand but a reflection of consumer strength. Both repeat and new guests grew by 10% year-over-year in Q2.
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Supported by this growth, Carnival exceeded its Q3 guidance for revenue, earnings, and booking levels. Sales increased by 17.7% year-over-year to $5.78 billion, leading to a return to positive EPS at $0.11, compared to $(0.31) in the year-ago period. Booking volumes also continued to rise, reaching record levels for 2025 sailings. The cumulative advanced booked position for 2025 is already higher than for 2024 in terms of both price and occupancy.
- Significant yield improvement was seen across Carnival's European and North American brands, up 20% and 7%, respectively.
- Carnival's adjusted EBITDA surpassed the 2Q19 figure, marking its highest in over 15 years.
- Limited inventory for the rest of 2024 puts Carnival in a strong position to raise ticket prices. Management noted that pricing on bookings taken during Q2 has continued to run higher for Q3 (Aug) and Q4 (Nov). Consequently, Carnival raised its FY24 (Nov) EPS outlook to $1.18 from $0.98 and increased its FY24 net yields by 75 basis points to 10.25%.
Since taking over nearly two years ago, CEO Martin Schneider has navigated Carnival through challenging times. Schneider has focused on improving commercial operations, strengthening the global network of ships, and aggressively managing down debt and interest expenses. These efforts have set Carnival on a path toward investment-grade metrics, a notable achievement given the pandemic's disruption and the current economic landscape. While consumers are more mindful of their spending, their continued willingness to travel is forming a robust base of demand in the cruise line industry, ensuring Carnival's long-term success.
