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Solid Booking Environment to Aid Carnival (CCL) in 2022

Carnival (CCL) is benefiting from the resumption of operations and improved booking.

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This story originally appeared on Zacks

The year 2021 has been tough for cruise operators, and Carnival Corporation & plc CCL is no exception. The company’s shares have declined 3.3% year to date, against the industry’s growth of 8.7%. However, it is gradually coming out of the woods. Resumption of operations and improved booking bode well. Carnival continues to focus on fleet expansion to drive growth. Let’s delve deeper.

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Key Growth Drivers

Following the coronavirus-induced shutdown, the company has commenced operations. The company is also working on its plan to resume sailing from Australia and Asia. As of fiscal 2021 end, the company resumed cruise operations with 50 ships (68% of its fleet capacity). The company intends to have its full fleet back in operation in the spring of 2022.

The company announced that booking volumes and book positions are very encouraging. Although the Delta variant negatively impacted bookings in the initial phase of the fourth quarter of fiscal 2021, it is said to have improved sequentially and returned to pre-Delta levels in November. During the fourth quarter, booking volumes for all future cruises were higher than booking volumes in the third quarter of 2021.

The company stated that cumulative advanced bookings for the second half of 2022 and the first half of 2023 are at the higher end of historical ranges and at increased prices compared with 2019 levels. Emphasis on price maintenance and comparable itinerary offerings added to the positives. Total customer deposits as of Nov 30, 2021, were $3.5 billion compared with $3.1 billion as of Aug 31, 2021. Going forward, the company intends to cash in the momentum by focusing on advertisement campaigns that include holiday activations for Christmas Day and New Year's Eve.

Carnival continues to focus on fleet expansion to drive growth. During the fourth quarter of fiscal 2021, the company stated that it will shortly add six LNG-powered ships to the AIDAcosma system along with AIDAnova for Germany-based travel. It also announced the addition of Costa Firenze and Costa Toscana (for Southern Europe) and Iona (the U.K.). Apart from this, the company added Rotterdam and Mardi Gras to its fleet. The company stated that the addition of new ships and the removal of less efficient ships are likely to pave the path for a 4% reduction in ship level unit cost in the upcoming periods, thereby enhancing the top and the bottom lines.

The Zacks Rank #3 (Hold) company anticipates cash flow from operations to turn positive at some point in the early part of 2022. It expects to generate higher EBITDA in 2023 compared to 2019 on account of additional capacity and improved cost structure.

Zacks Investment ResearchImage Source: Zacks Investment Research

Concerns

The pandemic has been hurting the company’s operations and global bookings. It believes that the coronavirus crisis is likely to cause a delay in ship deliveries as the shipyards have been impacted as well. However, it expects phased resumption of cruise operations to have a material impact on all aspects of its business, including the company's liquidity, financial position and results of operations.

Maintaining liquidity has become a herculean task during the pandemic for most of companies. At the end of Nov 30, 2021, the company’s total debt stood at $33.2 billion compared with $26.8 billion as of Aug 31, 2021. It ended the fourth quarter of fiscal 2021 with cash and cash equivalent of $9.1 billion compared with $7.2 billion in the previous quarter. Although the company’s cash flow generation has improved sequentially, it may not be enough to manage the high-debt level. Average monthly cash burn in the quarter was $510 million. At the end of fourth-quarter fiscal 2021, the company had a debt-to-capital ratio of 0.6.

Key Picks

Some better-ranked stocks in the Zacks Consumer Discretionary sector Electronic Arts Inc. EA, Bluegreen Vacations Holding Corporation BVH and Century Casinos, Inc. CNTY. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Electronic Arts carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 11.7%, on average. Shares of the company have increased 6.7% in the past month.

The Zacks Consensus Estimate for Electronic Arts’ current financial-year sales and earnings per share (EPS) suggests growth of 24% and 22.3%, respectively, from the year-ago period’s levels.

Bluegreen Vacations flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 695%, on average. Shares of the company have soared 159.7% so far this year.

The Zacks Consensus Estimate for Bluegreen Vacations’ current financial-year sales and EPS indicates growth of 27.5% and 199.3%, respectively, from the year-ago period’s levels.

Century Casinos carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 758.9%, on average. Shares of the company have appreciated 99.4% so far this year.

The Zacks Consensus Estimate for Century Casinos’ current financial-year sales and EPS suggests growth of 26.9% and 146.6%, respectively, from the year-ago period’s levels.



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Carnival Corporation (CCL): Free Stock Analysis Report

 

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