Carnival Earnings: Strong Booking Momentum Weighed Down by Higher Near-Term Cost Outlook

No-moat Carnival announced its first positive earnings report since 2020's first quarter. By all accounts, third-quarter results indicate that consumers have yet to pull back on travel, with the firm noting the cumulative advance-booked position for 2024 is above the high end of the historical range at higher prices than 2023. Moreover, booking volumes in the period were around 20% above 2019 levels, helped by Europe demand that has finally returned to prepandemic patterns. Along with the $6.3 billion Carnival has in customer deposits, all signals indicate cruising is resonating with consumers. Shares have traded flat since the announcement as we believe strong third-quarter results (as reported net per day 4% over 2019 levels, adjusted EBITDA of $2.2 billion, and adjusted EPS of $0.86) were offset by a fourth-quarter outlook that included EBITDA a bit below consensus expectations (FactSet) at $800 million-$900 million. In total, the full-year outlook for adjusted EBITDA of $4.1 billion-$4.2 billion was in line with the forecast underlying our $22 (GBX 1,740) fair value estimate.