Carnival Cruises
Carnival's main challenge is it took on huge amounts of debt and diluted shares to raise cash during the pandemic. However, this is now a drag on the stock price, specifically from earnings per share perspective. The company is also feeling the impact of inflation due to higher food, energy, and labor costs, yet, it's been unable to raise prices to offset these higher costs. If these trends continue, then investors should start considering bankruptcy risk as the stock price is now below the pandemic lows.
Inside the Numbers
In its fiscal Q3, Carnival reported a loss of $0.65 per share which was steeper than expectations of a loss of $0.44 per share. Revenue also missed at $4.3 billion vs $4.7 billion.
Carnival's major challenge in the post-pandemic era is rising costs due to inflation, supply chain disruptions, and increased health and safety protocols. Overall, operating costs came in at $3.4 billion, more than double last year's $1.6 billion although some of this is attributable to more ships and passengers.
Bookings were up 15% from the previous quarter to 84%. In last year's Q3, occupancy was at 54%, while it reached 94% this quarter. However, in the post-pandemic world, the ships have less capacity. However, the company is forecasting a slight drop in bookings in the coming quarters.
Another issue is the spike in interest rates which is particularly worrisome for Carnival given its heavy debt load and likely need to tap capital markets in the coming months. So far this year, Carnival has made $1 billion in payments and has a staggering $9 billion due by 2025.
Carnival's issues aren't unique to itself as Royal Caribbean
