On Friday, HSBC (LON:HSBA) analyst Ali Naqvi upgraded Carnival Corporation (NYSE:CCL) stock rating from ’Reduce’ to ’Hold’ and increased the price target to $24.00, up from the previous $14.00. This upgrade aligns with broader analyst sentiment, as InvestingPro data shows eight analysts have recently revised their earnings estimates upward, with price targets ranging from $14 to $34. Naqvi’s decision comes in light of Carnival’s resilient booking trends and robust progress in profit recovery and debt reduction. The analyst noted the cruise operator’s strong booked position, despite prevailing macroeconomic concerns, and recent refinancing efforts as steps in the right direction.
Carnival, a prominent player in the Hotels, Restaurants & Leisure industry with a market capitalization of $27.3 billion, has exhibited positive booking trends, as indicated by recent commentary from cruise industry peers. These trends include healthy booking levels and strong pricing from December to March. Rival Royal Caribbean Cruises Ltd. (NYSE:RCL) reported a significant 19% EBITDA growth for the first quarter of 2025, driven by an increase in net yields of 4.7% year-over-year and effective cost control measures that saw a slight decrease of 0.3% year-over-year. For deeper insights into Carnival’s financial health and competitive position, InvestingPro subscribers can access comprehensive analysis and real-time metrics.
Carnival itself has reported encouraging first-quarter results, with a notable 38% year-over-year increase in EBITDA to $6.38 billion, bolstered by a 7.3% year-over-year rise in net yields. The company’s overall financial health score is rated as GREAT by InvestingPro, with particularly strong growth and profit metrics. This performance has led the company to increase its EBITDA guidance by 2% for the fiscal year 2025, supported by strong booking trends expected to continue throughout the year. Additionally, both Carnival and its industry peers have observed solid demand for close-in bookings and a continued uptick in onboard revenue, contributing to a robust revenue of $25.4 billion in the last twelve months.
Norwegian Cruise Line Holdings Ltd . (NYSE:NCLH), however, has been the exception within the sector, experiencing softer bookings, which have led to lower occupancy rates and net yields for the fiscal year 2025. Despite this, the overall positive outlook for Carnival and the cruise industry, as reflected by HSBC’s rating upgrade, points to a resilient sector in the face of economic challenges. Trading at a P/E ratio of 13, Carnival appears fairly valued according to InvestingPro’s Fair Value analysis, with analysts projecting continued profitability for the fiscal year 2025.
In other recent news, Carnival Corporation has made significant financial moves by pricing a $1 billion private offering of senior unsecured notes at an interest rate of 5.875%, maturing in 2031. This initiative is aimed at refinancing existing debt, specifically to redeem $993 million of its higher-interest 7.625% senior unsecured notes due in 2026, which is expected to save the company over $20 million annually in net interest expenses. Additionally, Fitch Ratings has upgraded Carnival’s Long-Term Issuer Default Rating to ’BB+’ from ’BB’, with a positive outlook, citing strong booking activity and management’s dedication to reducing debt. Fitch anticipates a decline in Carnival’s debt to $27 billion by 2025 from $35.6 billion in 2022, alongside an increase in Free Cash Flow.
Furthermore, Carnival has announced the redemption of $350 million of its 7.625% senior unsecured notes due in 2026, scheduled for May 1, 2025, as part of its strategy to lower debt and interest expenses. This move is aligned with the company’s ongoing efforts to improve its balance sheet following the challenges of the global pandemic. In corporate governance news, Carnival shareholders recently approved all board nominees and proposals during their annual meetings, reflecting confidence in the company’s management and strategic direction. This included the re-election of Micky Arison as a director and the approval of executive compensation practices.
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