Carnival Faces Fuel Cost Pressure Ahead of September 29 Earnings

Insider Monkey··US·Read original
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Summary · why it matters

Carnival Corporation heads into its September 29 fiscal third-quarter report with its stock down roughly 11% over the past month and more than 24% for the year, even after a quarter that delivered record net income, record yields, and its lowest leverage ratio in years. The company is the only major cruise line that does not hedge fuel, and it guides fuel cost per metric ton at approximately $812 for the third quarter; its own sensitivity table shows a 10% move in that cost swings adjusted net income by $56 million in a single quarter and $102 million across the remainder of the year. That exposure drove BofA, JPMorgan, TD Cowen, Goldman Sachs, Stifel, Barclays, Deutsche Bank and Wells Fargo to trim price targets between September 14 and September 24, with only Deutsche Bank shifting its rating to Hold from Buy. BofA's Andrew Didora cut to $38 from $42 while keeping Buy, JPMorgan went to $39 from $43 on Overweight, and Goldman Sachs holds a $30 target, arguing 2027 estimates may still need to come down further. Susquehanna, cutting to $28 from $33, flagged Royal Caribbean's new joint venture with Sandals Resorts as a long-term threat to Caribbean yields for both Carnival and Norwegian Cruise Line, while Wells Fargo trimmed to $36 from $38 on Overweight. In its second quarter, Carnival absorbed nearly 30% higher fuel prices and extreme Middle East-related disruption to its European deployments yet still beat its own guidance by $100 million, posted a twelfth straight quarter of record net yields, and cut net debt to adjusted EBITDA to 3.1 times from 3.4 times a year earlier. Hedge fund conviction moved opposite the stock, with bullish funds rising to 63 from 57 quarter over quarter, and short interest climbed to 48.18 million shares as of September 15 from 36.81 million a month earlier, or 3.79% of float.

Impact on assets 10

Financials▲ · 6 stocks
Consumer Discretionary▼ · 3 stocks
Carnival Corporation
CCL
▼ NegativeSupplyCapitalrelevance

Carnival is the only major cruise line that does not hedge fuel, and its ~$812/ton fuel cost exposure drove a wave of analyst price-target cuts ahead of earnings.

Norwegian Cruise Line Holdings Ltd
NCLH
▼ NegativeCompetitionrelevance

Susquehanna flagged Royal Caribbean's new Sandals Resorts joint venture as a long-term threat to Caribbean yields for both Carnival and Norwegian.

Royal Caribbean Cruises Ltd
RCL
▼ NegativeCompetitionrelevance

Royal Caribbean's new joint venture with Sandals Resorts was cited by Susquehanna as a long-term threat to Caribbean yields for Carnival and Norwegian.

Digital Finance & Tokenization▲ · 1 stocks

Off-coverage companies 2

Sandals Resorts InternationalPrivate± Mixed
relevance

Susquehanna International GroupPrivate± Mixed
relevance

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