To The Moon

$Carnival(CCL)$ is expected to report the first-quarter financial results before the market opens on 21 March 2025 (Friday). CCL is expected to report $5.75 billion in sales, up from $5.41 billion in the same period last year. CCL is also expected to swing to profit of 2 cents a share, compared with a loss of 14 cents a share same period last year. Carnival (CCL) Last Positive Earnings Call Saw Share Price Drop By 16.40% Carnival had a positive earnings call on 20 Dec 2024 but we saw a decline of 16.40% on its share price. The earnings call highlighted a record-breaking year with strong financial performance, significant improvements in key metrics, and a positive outlook for 2025. The company's successful cost management, sustainability achievements, and strategic investments in new destinations further support the positive sentiment. However, challenges such as potential Mexican passenger charges and reliance on organic growth due to limited new capacity were noted. Carnival (CCL) Guidance On Debt Reduction Efforts During the Carnival Corporation & plc Fourth Quarter 2024 Earnings Conference Call, the company provided robust guidance for the upcoming years, reflecting strong financial performance and strategic initiatives. The call revealed that fourth-quarter net income surpassed expectations by over $125 million, driven by a 6.7% increase in yields and record revenues of $25 billion for the year. The company reported an 11% increase in full-year yields, attributed largely to higher prices across major brands, and onboard spending that accelerated each quarter. Carnival's ongoing cost management resulted in unit costs coming in 100 basis points better than initial guidance. Looking ahead, 2025 is projected to see yield growth exceeding 4%, with EBITDA per ALBD and ROIC targets expected to be met a year early. The company also highlighted significant debt reduction efforts, having paid down over $8 billion since January 2023, contributing to an improved net debt-to-EBITDA ratio of 4.3x. Additionally, Carnival emphasized its enhanced destination strategy, including the launch of Celebration Key, and progress on sustainability goals, such as a 17.5% reduction in greenhouse gas emissions intensity compared to 2019. Key Factors Influencing Q1 2025 Earnings Carnival Corporation's fiscal Q1 2025 earnings will likely reflect a mix of recovery momentum and ongoing challenges. Here are some of the factors and key metrics I will be watching : Demand Recovery and Bookings Post-Pandemic Rebound: Continued recovery in travel demand, especially from North American and European markets, may drive higher occupancy rates. Early 2025 could benefit from strong advance bookings for summer cruises. In the previous earnings, we saw full year revenues hit an all-time high of $25 billion with record yields, per diems, EBITDA, and operating income. Customer deposits and booking trends also reached record levels. Fourth quarter net income improved by over $250 million year-over-year, exceeding expectations by over $125 million. Full year 2024 yield increased by 11%, outperforming original guidance by 250 basis points. Pricing Power: If Carnival maintains or increases ticket prices without heavy discounting, revenue per passenger (yield) could rise, signaling healthy demand. Cost Management Fuel Costs: Volatile oil prices could pressure margins if unhedged. However, Carnival’s fuel hedging strategies might mitigate some risk. Operational Efficiency: Post-pandemic streamlining (e.g., optimized staffing, fleet upgrades) may reduce costs. Ancillary revenue (excursions, onboard spending) will be critical for margin improvement. Unit costs came in 100 basis points better than original guidance due to cost savings initiatives and an easing inflationary environment. Debt and Liquidity Debt Burden: High debt levels ($31 billion as of 2023) remain a concern. Progress in deleveraging or refinancing at favorable rates will be closely watched. Paid down over $8 billion in debt since January 2023 peak, with $5 billion repaid in 2024 alone. Net debt-to-EBITDA ratio improved to 4.3x, nearing investment-grade metrics. Cash Flow: Positive operating cash flow generation is essential to service debt and fund operations without further liquidity strain. Macroeconomic Environment Consumer Sentiment: Discretionary spending on cruises may soften if inflation or recessionary pressures persist. Conversely, a stable economy could sustain demand. 2025 is projected to have yield growth exceeding 4% with incremental $400 million to the bottom line. Booking volumes and prices are higher for each quarter of 2025 compared to the previous year. Geopolitical Risks: Regional tensions (e.g., Middle East, Eastern Europe) or health scares could disrupt itineraries or deter bookings. Uncertainty regarding additional passenger charges in Mexico, potentially affecting less than 5% of itineraries starting July 2025. Competitive Landscape Market Share: Carnival must fend off rivals like Royal Caribbean and Norwegian. Differentiation through new ships (e.g., Excel-class vessels), itineraries, or sustainability initiatives (e.g., LNG-powered ships) could attract customers. Introduction of Celebration Key and the rebranding of Half Moon Cay to RelaxAway are expected to enhance customer experience and drive additional demand. With no significant new capacity additions, future growth largely relies on organic improvements and existing fleet enhancements. Regulatory and Environmental Pressures Emissions Compliance: Costs tied to environmental regulations (e.g., carbon neutrality goals) may weigh on margins, though investments in cleaner technology could enhance long-term competitiveness. Achieved a 17.5% reduction in greenhouse gas emissions intensity since 2019, on track for a 20% reduction by 2026. Absolute emissions are down almost 10% despite a 9% increase in size since 2019. Carnival (CCL) Price Target Based on 16 Wall Street analysts offering 12 month price targets for Carnival in the last 3 months. The average price target is $29.40 with a high forecast of $32.00 and a low forecast of $25.00. The average price target represents a 39.67% change from the last price of $21.05. I think the thing I would look out is still the debt reduction and also the geopolitical risks, which is more significant now that the conflict in middle east is back, this could come back to affect CCL same as the previous quarter. Here are some of the positive catalysts and negative risks that I think would affect the price target. Positive Catalysts: Earnings beat, raised FY2025 guidance, or debt repayment milestones. Negative Risks: Lower-than-expected occupancy, weak yield growth, or liquidity concerns. Technical Analysis - Exponential Moving Average (EMA) If we look at how CCL is trading before its earnings, it was trying to create an uptrend, but look like it did not succeed ended with a sideway trade. RSI is also showing weak momentum as investors might be holding back their buying with the uncertainty brought by tariffs and also the geopolitical tensions in the middle east. So we will need to watch closely on how things might develop these few weeks, but I would think for CCL to go on a bull case, we will need to see strong demand drives occupancy rates above 100%, ancillary revenue surges, and cost controls lead to EBITDA growth. Debt reduction progress sparks investor optimism. But weak bookings, rising fuel costs, and elevated interest expenses result in missed EPS estimates. Guidance downgrades due to macroeconomic headwinds. These factors could bring down CCL to a bearish trend. Summary Carnival’s Q1 2025 earnings will hinge on balancing post-pandemic demand recovery with financial prudence. While improved bookings and operational efficiencies could support profitability, high debt and macroeconomic uncertainty remain overhangs. I think we need to watch these three factors closely for the earnings and also how CCL trade goes. Occupancy Rates and Yield: Indicators of pricing power and demand. Debt Management: Progress in reducing leverage. Guidance: Updates on summer 2025 bookings and cost outlook. If Carnival demonstrates sustained demand, cost discipline, and deleveraging progress, the stock may react positively. However, any signs of softening consumer spending or margin pressure could trigger volatility. Appreciate if you could share your thoughts in the comment section whether you think CCL would be able to show stronger profitability if they can show strong debt reduction and also the strong holiday bookings and also 2025 bookings. @TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts. Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.