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Carnival Corp CCL

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Morningstar’s Analysis

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Economic Moat




Carnival Resumes Sailing Abroad but Remains Halted in North America; Shares Undervalued

Jaime M. Katz, CFA Senior Equity Analyst

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).

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Company Profile

Business Description

Carnival is the largest global cruise company, set to deploy 87 ships on the seas once cruising fully resumes after the pandemic. Its portfolio of brands includes Carnival Cruise Lines, Holland America, Princess Cruises, and Seabourn in North America; P&O Cruises and Cunard Line in the United Kingdom; Aida in Germany; Costa Cruises in Southern Europe; and P&O Cruises in Australia. Carnival also owns Holland America Princess Alaska Tours in Alaska and the Canadian Yukon. Carnival's brands attracted about 13 million guests in 2019.

3655 North West 87th Avenue
Miami, FL, 33178-2428, Panama
T +1 305 599-2600
Sector Consumer Cyclical
Industry Travel Services
Most Recent Earnings Aug 31, 2020
Fiscal Year End Nov 30, 2020
Stock Type
Employees 106,000