Carnival Shares Crash As Cruise Rebound Sinks

Carnival Corp. shares crashed Friday morning as fuel prices and inflation delayed its return to profitability. There’s concern that the cruise ship rebound post-Covid has stalled amid waning consumer demand. 

The world’s largest cruise ship operator missed EPS and EBITDA estimates for the third quarter. It expects advance bookings for the fourth quarter to fall below average trends — a surprise to estimates just weeks ago.

The cruise ship operator has been discounting tickets and increasing advertisements to attract passengers. Still, the occupancy rate for the third quarter was 84%, coming in short of the 86.5% average estimate analysts surveyed by Bloomberg. 

“We are continuing to close the gap to 2019 as we progress through the year, building occupancy on higher capacity and lower unit costs,” said CEO Josh Weinstein.

Revenue in the third quarter increased to $4.31 billion from $546 million in the same quarter last year but missed Wall Street analysts’ average estimate of $4.90 billion, according to IBES data from Refinitiv. Net losses were $770 million, or 65 cents per share, from $2.84 billion, or $2.50 per share, a year earlier. Revenue has missed expectations for ten consecutive quarters. 

Similarweb travel and leisure analyst Jim Corridore told Reuters the downward revision to the fourth quarter is not as much due to slowing demand or revenue problems but rather soaring costs to operate vessels, such as higher fuel, food, and labor prices. 

Carnival expects 2023 bookings “slightly above the historical average and at considerably higher prices” than 2019 when normalized for future cruise credits. 

The demand outlook is very ominous. Here’s what the Miami-based company said: 

Events and conditions around the world, including war and other military actions, such as the current invasion of Ukraine, inflation, higher fuel prices, higher interest rates and other general concerns impacting the ability or desire of people to travel, have led, and may in the future lead, to a decline in demand for cruises, impacting our operating costs and profitability.

The stock crashed as much as 23% this morning to levels not seen since 1993. 

Also, several of Carnival’s bonds were the largest decliners in the junk bond space. Equity and bond prices for other cruise liners also fell. 

This is the latest example of consumer-sensitive companies warning about downbeat earnings, inflationary woes, and weakening consumers.