Analyst Note| Jaime M. Katz, CFA |
With no ships deployed during no-moat Carnival’s third quarter, there was virtually no revenue reported in the period. However, given the company’s improving ability to control costs, an adjusted earnings per share loss of $2.19 was better than the $2.45 loss we had forecast over the same horizon. All cruise costs fell more than 50% year over year, with food costs down more than 90%, fuel expenses down 70%, and payroll 55%, as there were no passengers that required support. While the fourth quarter has a limited ability to generate revenue, given the still-standing CDC no-sail order, both Costa and Aida should each have three ships deployed in Europe by year-end (with two Costa ships already sailing). With results generally tracking our near-term forecast, we expect to maintain our $20 (GBX 1,600) fair value estimate and view shares as attractive, particularly as we edge closer to a start sail date (which the company believes could be before year-end in North America, although with limited capacity).