Carnival Cruises
Overall, Carnival has been an abysmal stock with a 57% decline over the past year. Additionally, the stock is trading close to its pandemic lows, despite the economy being in a much better position. Of course, the major factor is that cruise operators had to issue debt and stock in order to raise capital to survive the downturn.
Inside the Numbers
In its fiscal Q4, Carnival reported an adjusted loss of $0.85 per share which was better than expectations of a loss of $0.88 per share. Revenue also came in better than expected at $3.9 billion vs $3.8 billion. These figures were substantially better than last year when it lost $1.72 per share and generated $1.3 billion in revenue.
The company said the major factor was a continued relaxation of Covid-19 restrictions and increasing comfort among consumers to return to cruising. It said that booking was particularly strong in December, and it expects these trends to continue into next year.
One headwind for the company is increasing food and fuel costs. In Q4, fuel costs came in at $580 million vs $282 million in 2021. Similarly, food costs were more than double at $277 million vs $107 million.
For investors, it's an interesting situation. From an operating perspective, Carnival's business is clearly improving especially as fuel and food cost increases should abate over the next 12 months. And, strength in travel is clearly a secular theme as bookings continue to gain steam regardless of economic challenges.
However, the major headwind is the dilution of shares and heavy debt load which will undermine EPS for many years. Prior to the pandemic, the company had $12 billion of debt. Now, it has $27 billion. The share count has also nearly doubled. This means that while the stock price has collapsed, its enterprise value is only down by 20%.
