ii view: Carnival demand only partially offsets rising fuel costs

First-quarter results to 28 February

• Revenue up 6.1% to $6.17 billion (£4.6 billion)
• Operating income up 11.8% to $607 million 
• Adjusted earnings up 50% to $0.20 per share

Chief executive Josh Weinstein said:

"We delivered a strong start to the year, with record first-quarter operating results that exceeded our guidance, driven by healthy fundamentals and solid execution across the business.”

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ii round-up:

Carnival (LSE:CCL) today detailed bookings that cover nearly 85% of 2026 capacity, with the cruise ship operator countering increased fuel costs with robust demand and ongoing cost savings. 

An additional forecast for $150 million of extra profit is expected to help counter only some of the anticipated $500 million increase in fuel costs, with Carnival outlining more medium- to long-term performance targets under a new performance improvement programme.

Shares in the FTSE 250 and S&P 500 company fell around 3% in US trading having come into this latest news down by close to a fifth so far in 2026. The FTSE 250 and S&P 500 indexes are each down by around 6% year-to-date. Cruise and airline provider TUI AG (XETRA:TUI1) has fallen by a quarter so far this year.

As well as Carnival itself, the group’s other brands include Princess Cruises, Cunard and P&O.

Revenues for the first quarter to late February climbed 6.1% to a record for the period of $6.17 billion. Adjusted earnings rose 50% to $0.20 per share. 

A newly announced $2.5 billion share buyback programme follows Carnival’s late 2025 decision to restart the dividend payment. 

The new performance improvement programme called PROPEL (Powering Growth and Returns, Responsibly) is designed to aid the return of around $14 billion to shareholders up to 2029. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results. 

ii view:

Started with just one secondhand ship in 1972, Carnival today operates around 90 ships across various brands including Aida, Holland America Line, and Seabourn. Passenger numbers hit 13.6 million during the 2025 financial year, up from 13.5 million in 2024. Geographically, the US generated most revenues last year at 55%, followed by the UK and Germany each at around 12%, and the rest of the world the 21% balance. 

Under a new simplification proposal, Carnival is now considering unifying its dual-listed structure into a single company, Carnival Corporation, listed solely on the New York Stock Exchange. A shareholder vote is expected in April. 

For investors, a war in the Middle East causing soaring fuel prices and the resultant increase to group costs, now warrants consideration. Increased economic outlook uncertainty and its impact on future customer spending cannot be forgotten. The many factors outside of management’s control which can hinder performance, such as the weather, wars and even pandemics, can never be overlooked, while S&P’s credit rating remains below an investment rating, if only just.  

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More favourably, future customer bookings remain robust, aided by investment in new destinations such as its Caribbean Celebration Key outlet. The potential new simplified company structure is expected to reduce group costs. Performance improvement targets to 2029 are now being pursued, while management’s focus on reducing net debt continues. 

In summary, travel related companies continue to warrant an added degree of caution given the current risk of further fuel price rises. However, robust forward bookings, a consensus analyst fair value estimate above £25 per share and longer-term upward trend make this one to watch.

Positives: 

• Diversity of brands and geographical locations
• Investment in own destinations

Negatives:

• Uncertain economic outlook
• Exposure to currency movements

The average rating of stock market analysts:

Buy