Could Carnival Stocks Soar Higher Next Week?

This may be the lull before earnings season really starts in a few weeks, but that doesn’t mean there’s a moratorium on financial updates. Carnival (NYSE: CCL) (NYSE:CUK) releases its fiscal third-quarter results before the market opens Monday.

The last trading day of the month – and the quarter – will not be sleepy. Carnival’s report covers the months of June, July and August. This is the peak season for the cruise industry. Expectations may be high, but Carnival has taken on the challenge before.

Earning his sea legs

Much depends on next week’s new figures. Although the world’s largest cruise company is largely trading in the same position as at the beginning of this year, its turnover more than doubled last year.

How big is the cruise line’s fiscal third quarter? The June guidance calls for reported earnings of $1.15 per share, the lion’s share of the $1.18 per share it is targeting for the entire 2024 fiscal year. Analysts are holding on to slightly more and are targeting quarterly earnings of $1.16 per share and full-year earnings. of $1.21 per share.

Exceeding a company’s guidance can be a risky game for analysts, but over the past two years they have consistently fallen short of reality. Lately, the gap between what Wall Street professionals model and what Carnival ultimately delivers is widening.

Data source: Yahoo! Finances. EPS = earnings per share (adjusted).

Let’s say Carnival lands right at its target range after seven consecutive earnings reports (including at least double digits in each of the last four reports). A lot could happen if earnings per share rise 34% to $1.15 for the cruiser’s biggest quarter. Carnival currently trades at 25 times trailing earnings. The next time the market’s opening bell rings, that number would drop to 18.

Riding the wave

There are some good reasons to believe another beat is coming. Two analysts have raised their price targets this month, largely in anticipation of the financial update coming at the end of this month. Steven Wieczynski was there last week Stifel financial believing that another beat-and-raise performance could send the stock higher. Looking to next year, he sees the potential for Carnival to earn much more than the $1.58 per share that his fellow analysts are currently modeling. In other words, Carnival could trade for much less than twelve times forward earnings.

Ben Chaiken was there a day earlier Mizuho financial group with the target boost. He sees Carnival’s improving underlying trends and the decline in fuel prices this summer as bullish catalysts for a strong fiscal third-quarter report. Carnival is his company’s top choice in the leisure sector. Last week’s two new revised price targets imply that Carnival stock has 34% to 45% upside potential in the near term.

Analysts see Carnival’s revenue hitting a quarterly record of $7.83 billion, up 14% from where it landed last summer and up 20% from its pre-pandemic peak. Again, there’s certainly room for a hit, but the best chance for a hit comes from the bottom line, given the scalable nature of the business and all the favorable tailwinds behind Carnival’s fleet.

Will Carnival surpass the record $8.3 billion in customer deposits it held at the end of May? Don’t bet on it. Much of that money went to the busy summer sailings. That measure also fell consecutively between the second and third quarters of the budget year last year. Will Carnival have paid down more than the $6.6 billion in debt it repurchased over the past five quarters? This is a smarter bet. Carnival could even follow its closest rival and reinitiate its quarterly dividend, but the best use of its new wealth right now is to scale back or at least refinance its substantial debt load.

With cruise line shares rising in recent weeks, Carnival will need more than just a good quarter to continue the rebound. Fortunately for investors, fundamentals and momentum are currently on their side.

Do you need to invest $1,000 in Carnival Corp. now? invest?

Consider the following before buying shares in Carnival Corp. buys:

The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Carnival Corp. wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.

Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $760,130!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.

View the 10 stocks »

*Stock Advisor returns September 23, 2024

Rick Munarriz holds positions in Carnival Corp. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.

Could Carnival Stocks Soar Higher Next Week? was originally published by The Motley Fool