ii view: why Carnival shares just rallied at a rate of knots

Second-quarter results to 30 June

• Revenue up 9.5% to $6.33 billion (£4.62 billion)
• Adjust profit (EBITDA) up 26% to $1.5 billion
• Adjusted earnings of $0.35 per share, up from $0.11 in Q2 2024 

Guidance:

• Now expects full-year 2025 adjusted profit (EBITDA) of $6.9 billion (£5 billion), potentially up more than 10% year-over-year

Chief executive Josh Weinstein said:

"Our amazing team delivered yet another phenomenal quarter. Our strong results, booked position and outlook are a testament to the success of our ongoing strategy to deliver same-ship, high-margin revenue growth. 

“We continue to set ourselves up well for 2026 and beyond, with so much more potential to take our margins, returns and results even higher over time."

• Invest with ii: Open a Stocks & Shares ISA | ISA Investment Ideas | Transfer a Stocks & Shares ISA

ii round-up:

Carnival (LSE:CCL) detailed sales and profits that beat Wall Street forecasts, with the cruise ship operator increasing full-year guidance and flagging an expectation that it'll exceed 2026 year-end financial targets 18 months early. 

Higher prices and robust onboard sales pushed second-quarter revenues up by a tenth from a year ago to $6.33 billion, driving a more than tripling in adjusted earnings to $0.35 per share. Analysts had forecast outcomes of $6.2 billion and $0.24 per share respectively.  

Shares in the FTSE 250 and S&P 500 company gained 12% in post results trading having come into these numbers up around a third over the last year. That’s comfortably ahead of gains of 4% and 11% for the UK and US indices over that time. Shares in much small rival Saga (LSE:SAGA), also reporting results today, are up by more than a half over that time.   

Operating ships across brands including Costa, Cunard, P&O and Carnival itself, the company is unique given its inclusion in both the FTSE250 and S&P 500.

Advanced bookings for the remainder of 2025 remain strong, with Carnival now forecasting annual adjusted profit of $6.9 billion. That’s potentially up by more than 10% from 2024 and ahead of its earlier year estimate. 

A 52% increase in adjusted profit (EBITDA) per Available Lower Berth Day (ALBD) was comfortably ahead of management’s year-end 2026 goal, with a plan to cut carbon intensity by 20% from 2019 levels also achieved early. 

Carnival’s ratio of net debt to adjusted profit fell to 3.7 times as of late May, down from over 6 times in 2023 and just after the pandemic. 

ii view:

Started in 1972 with just one second-hand ship, Carnival today operates around 90 ships across various brands and including Aida, Holland America Line, Princess Cruises and Seabourn. Passenger numbers hit 13.5 million of its last 2024 fiscal year, up from 12.5 million in 2023. North America generated most sales during 2024 at 60%, followed by Europe at 30%, and Australia and Asia the balance.  

For investors, the many factors outside of management’s control which can impact performance, such as wars, the weather, and even pandemics, cannot be forgotten. Net debt remains elevated due to the Covid crisis, fuel costs and currency movements regularly hinder profits, while high debt means the dividend remains suspended. 

• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
• Investors optimistic again, but not for all markets
• Why Warren Buffett could back Britain in final mega-dea

To the upside, trends such as ageing populations and the desire for multi destination holidays arguably work in its favour. A focus on reducing group debt persists. Costs are still being attacked, while a diversity of both brands and geographical operations is not to be overlooked. 

In all, heightened global geopolitical tensions continue to offer reason for caution. That said, ongoing profit progress and a consensus analyst estimate of fair value above £19 per share offer grounds for cautious optimism over the longer term. 

Positives: 

• Diversity of brands and geographical locations
• Focus on costs

Negatives:

• Uncertain economic outlook
• Dividend suspended

The average rating of stock market analysts:

Buy