Carnival Corporation, the largest cruise line operator globally, is gearing up to release its fiscal third-quarter results on Tuesday, September 29. Currently, its shares are hovering near their lowest point in a year, and this upcoming report has drawn significant attention.
This year has not been kind to cruise stocks. Major competitors like Royal Caribbean and Norwegian Cruise Line Holdings have also seen significant declines, influenced by higher fuel prices, geopolitical instabilities, and worries about travel demand.
Still, Carnival’s noticeable drop in stock price has led some investors to ponder whether there’s an opportunity to buy before the earnings announcement.
Carnival’s Q3 Expectations
The Zacks Consensus Estimate anticipates that Carnival will report earnings per share (EPS) of $1.36 for the third quarter. This represents a decrease of about 5% compared to last year, primarily due to rising costs and disruptions caused by events in the Middle East affecting itineraries in Europe and the Mediterranean. On a brighter note, quarterly revenue is expected to rise slightly to $8.36 billion, up more than 2%.
It’s worth noting that Carnival has a strong track record, having exceeded earnings expectations for 15 consecutive quarters, with an average EPS surprise of 18.15% over its last four quarters. The company has also surpassed revenue estimates in three out of the last four quarters, showing a slight positive surprise on sales averaging 0.45%.
Investors will be keen to see if steady demand, effective pricing strategies, and spending onboard can balance out the increased costs related to fuel and travel.
CCL Valuation Comparison
As it stands, CCL shares are trading around $22, which puts the company’s forward earnings ratio at 10 times. This is fairly in line with Norwegian Cruise Line but notably lower than Royal Caribbean’s 13 times, and beneath the average of 17 times for the Zacks Leisure and Recreation Services Industry.
This apparent discount might be a response to Carnival’s higher exposure to immediate cost challenges and a weaker earnings outlook. For instance, Royal Caribbean is expected to see stronger earnings growth in 2026, while Carnival’s full-year EPS is forecasted to drop 2% to $2.20 per share.
Bottom Line
The current low share price and valuation of Carnival make CCL potentially appealing for investors, especially if the results released on Tuesday indicate that demand remains strong in spite of rising costs.
However, with earnings for the third quarter anticipated to fall amidst uncertainties relating to fuel expenses and travel disruptions in Europe and Mediterranean regions, investors might consider waiting for the results before making substantial investments.
At this point, Carnival stock holds a Zacks Rank #3 (Hold), suggesting that while the valuation looks attractive, there may need to be more robust earnings momentum to drive a more significant recovery.
