Carnival (CCL) Cost and Debt Reduction Key To Earnings Beat or Even Surprise

Earnings Per Share (EPS): The consensus EPS forecast for Q2 2025 is around $0.24, a significant increase from $0.11 in the same quarter last year. Some estimates range from $0.22 to $0.27.

Based on 10 analysts from Moomoo app, the earnings per share (EPS) consensus estimate is expected to come in at $0.245 per share.

Revenue: Analysts anticipate revenue of approximately $6.2 billion, which would represent about a 7.3% increase year-over-year.

Based on 18 analysts from Moomoo app, the consensus estimate for revenue is expected to come in at $6.210 billion.

Carnival (CCL) had a positive earnings call on 21 March 2025 which saw its share price gained 5.71% since.

The earnings call conveyed a very strong performance in the first quarter with record-breaking revenue and yield metrics, successful debt refinancing, and robust consumer demand. Despite acknowledging some macroeconomic and geopolitical volatility, the overall outlook remains positive with increased guidance for the full year and significant marketing and operational achievements.

In the recent earnings call, Carnival Corporation & plc reported a strong first quarter for fiscal year 2025, achieving high watermarks in revenue, EBITDA, and operating income. The company exceeded its net income guidance by more than $170 million, driven by a robust 7.3% yield increase, surpassing their yield guidance. The quarter saw a near doubling of operating income and $1.2 billion in EBITDA, marking a 40% year-over-year increase. Operating and EBITDA margins improved by over 400 basis points compared to the previous year, with both now surpassing 2019 levels.

Despite macroeconomic volatility, Carnival raised its full-year yield guidance to 4.7% and increased its earnings guidance for the year by $185 million, projecting approximately $600 million in incremental earnings. The company is on track to reach its 2026 financial targets a year early, with a targeted ROIC of 12% and EBITDA per ALBD over 50% higher than two years ago. Additionally, Carnival is progressing towards its 2026 greenhouse gas target, with a 19% reduction in carbon intensity compared to 2019. Customer demand remains strong, with historical high prices for 2025 bookings and record booking volumes for 2026. The company also highlighted successful marketing campaigns and ongoing infrastructure projects, such as the development of Celebration Key in the Caribbean and expansions in Alaska, which are expected to enhance future customer experiences and demand.

Strong Demand for Cruising: Leisure cruising demand has remained robust post-COVID-19, driven by attractive pricing compared to land-based vacations and the appeal of all-inclusive packages.

Increased Capacity and Pricing: Carnival's revenue is expected to benefit from higher capacity, increased onboard revenues, and some price increases implemented in recent quarters.

Fleet Optimization: The company's ongoing efforts to optimize its fleet are contributing to strong operating performance and profitability.

Q1 2025 Performance: Carnival had a strong Q1 2025, beating analyst estimates for both EPS ($0.13 vs. $0.02 consensus) and revenue ($5.8 billion vs. $5.74 billion consensus). This momentum is expected to carry into Q2.

Achieved first quarter high watermarks for revenue, EBITDA, operating income, and customer deposits. Net income exceeded guidance by over $170 million, with operating margins and EBITDA margins each improving over 400 basis points year-over-year.

Booking Trends: Carnival has reported higher prices on bookings for the remainder of 2025 compared to the previous year, and booking volumes for 2026 sailings and beyond have reached all-time highs. Reported a robust 7.3% yield increase, surpassing yield guidance. Yield growth for the full year is now expected at 4.7%. EBITDA reached $1.2 billion, a nearly 40% increase year-over-year.

Geopolitical Tensions and Tax Uncertainty: Potential cruise tax proposals under a new administration (e.g., Trump administration) could impact demand and profitability. Geopolitical volatility in general could erode consumer confidence. Acknowledged heightened macroeconomic and geopolitical volatility, although the company demonstrated resilience. There was no specific negative impact reported, but the backdrop remains uncertain.

Rising Costs: Increased fuel costs and dry-dock expenses could pressure margins. Carnival's sensitivity analysis warns that a 10% fuel cost spike could reduce annual adjusted net income by $131 million. Progress on optimizing the portfolio, including the sale of Seaborn Sojourn. Achieved a 19% reduction in carbon intensity compared to 2019, nearing the 2026 greenhouse gas target.

Higher than expected dry dock costs due to unplanned dry docks, affecting cruise costs without fuel per ALBD.

Inflation: Inflation's impact on discretionary spending could affect consumer cruise budgets.

Debt Leverage: Carnival still carries a significant debt load (around $27 billion). While recent refinancing efforts have cut interest costs, upcoming maturities in 2026 will test its liquidity. Refinanced $5.5 billion of debt, resulting in $145 million in annualized interest expense savings. The refinancing efforts contributed to lowering the full-year interest expense guidance by $100 million.

Actual EPS and Revenue: How do the reported figures compare to analyst consensus?

Onboard Revenue Trends: Continued strong growth in onboard revenue would be a positive sign.

Guidance for Q3 2025 and Full Year 2025: Any revisions to previous guidance (e.g., the $2.4 billion 2025 net income guidance) will be crucial.

Updates on Costs: Commentary on fuel costs, dry-dock expenses, and overall cost management will be important.

Debt Management: Any progress on refinancing or deleveraging will be closely watched.

Based on 18 analysts from Moomoo app offering 12 month price targets for Carnival in the last 3 months. The average price target is $28.50 with a high forecast of $33.00 and a low forecast of $21.00. The average price target represents a 20.97% change from the last price of $23.61.

Analysts generally hold a "Strong Buy" rating on CCL, with a mean price target of $27.88, suggesting a significant potential upside from current levels.

Despite a year-to-date stock decline (around 27%), Carnival's valuation metrics appear relatively cheap compared to its peers (e.g., Forward P/E of 12.91 vs. industry average of 19.74).

Though CCL bulls are in control, but they need to continue to build the daily uptrend continuation as any negative guidance or slip from the earnings expectations, it might slipped below the defence level at 26-EMA.

RSI momentum is still positive, but CCL seem to be trading sideways which could be a signs of the acknowledged heightened macroeconomic and geopolitical volatility, although the company demonstrated resilience.

I will be watching on what the upcoming earning result might tell us.

Carnival Corporation is expected to report strong Q2 2025 earnings driven by robust demand and improved operational efficiency.

However, as investor I will be keenly looking for reassurance on cost management, debt reduction, and any potential impacts from geopolitical factors or tax policy changes. A strong beat on earnings and optimistic forward guidance could significantly boost the stock, especially given its current valuation.

Appreciate if you could share your thoughts in the comment section whether you think CCL would be able to provide an earnings surprise if there is strong cost and debt reduction.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.