Last month, Carnival Corp (NYSE: CCL), a company part of the S&P 500 Index reported its quarterly earnings. Carnival Corp. is a leisure travel company, an industry that has been decimated amid the pandemic.
This company’s ships visit 700 ports under several brand names that include Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises (Australia), Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK), and Cunard.
Further, CCL also provides port destinations and operates hotels, lodges, motor coaches, and glass-domed railcars. The cruises are sold through tour operators and travel agents. The company has operations in the U.S., the U.K., Canada, Europe, Asia, New Zealand, and Australia. It operates 87 ships with 223,000 lower berths.
Let’s see how CCL performed in fiscal Q2 of 2021.
Revenue of $49 million in Q2
Carnival Corporation has been hit hard amid COVID-19. In Q2 of fiscal 2021, its sales stood at just $49 million and in the last four quarters, the company reported cumulative revenue of $140 million. Comparatively, its sales in 2019 touched a record high of $20.82 billion.
Its U.S. GAAP net loss stood at $2.1 billion while adjusted net loss stood at $2 billion for Q2 of 2021. CCL ended the quarter with $9.3 billion in cash and short-term investments giving the company enough liquidity to tide over near-term uncertainties.
Analysts tracking CCL stock forecast the company’s loss per share at $1.6 in Q2 while the company’s reported net loss stood at $1.8 per share. In Q1 of 2021, CCL’s revenue fell 99% year over year to $26 million.
Carnival expects to set sail in July which means its top-line growth should accelerate in the second half of 2021. Wall Street expects sales to reach $1.02 billion in Q3 of 2021 and $1.9 billion in Q4. The company’s sales are forecast to rise from $3.38 billion in 2021 to $18.27 billion in 2022.
It will allow CCL to improve the bottom line from a loss per share of $7.47 in 2020 to earnings of $0.33 in 2022. We can see it will take a couple of years for revenue to reach pre-pandemic levels. In fact, Carnival Corp expects peak capacity to return to pre-pandemic levels by next spring.
Carnival Corp ended Q2 with $32.24 billion in debt which is higher than its market cap of $30.18 billion. It suggests the company will not be reintroducing dividend payments in the near future.
In fiscal 20219, CCL generated $5.4 billion in cash from operations. Its capital expenditure stood at $5.4 billion and it also paid around $1.4 billion in dividends. Carnival Corp is likely to forego dividend payouts as cash flow normalizes to reduce its outstanding debt.
What next for investors?
Carnival Corp has underperformed the broader markets in the last few years. Between January 2010 and January 2020, CCL stock rose by 113%. Comparatively, the S&P 500 has returned 253% in this period. Since the start of 2021, the S&P 500 has gained 17% while CCL stock is down 59.43%. Currently, CCL is trading 60% below its record highs while the S&P 500 is at all-time highs.
Despite its tepid returns in the last 18 months, Carnival Corp continues to trade at a premium. For example, its price to book multiple of 1.75x is higher than its ratio of 1.4x in January 2020. Its high debt burden and an uncertain macro environment make it a risky bet for 2021 and beyond, given that CCL will have to regain passenger confidence and focus on cost savings while hoping the dreaded pandemic is brought under control.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
