Carnival, more revenue from individual cruise passengers and focus on costs

In short, all as easy as having a cocktail on the first class deck? The reality is more complicated. A first doubt expressed by analysts is that, since Carnival has several large ships, there is a risk of not being able to fill them. The answer, some experts point out, is that the group copes with the problem, first and foremost, by managing the booking curve. In other words: the company does not increase prices uniformly, but raises them over time. It sells a lot in advance at lower prices, and as occupancy rises, it raises the rate (except for last-minute purchases). In this way, average revenue tends to be maximised without the risk of finding itself with empty cabins. Then Carnival exploits fleet segmentation. The group has brands (such as Seabourn) operating through smaller, niche and high-class vessels. This allows it to intercept different markets and balance risk. Finally, it is indicated, the cost of a cruise often remains competitive compared to a land-based trip. Consequently, the space to exploit price leverage exists.

 The geopolitical knot

That said, however, it can further be argued that the global geo-political context induces uncertainty. A scenario that risks both curbing the demand for cruises in general and limiting the routes that can be travelled. True, various experts admit. And yet, firstly, diversification in the group's geographical presence allows, for example, ships to be redeployed if certain areas become problematic (e.g. the Middle East). In addition, flexibility on pricing allows Carnival to slow down increases, focus on last minute offers and slightly reduce margins, while still maintaining high vessel occupancy.

Yes, ships. The group, in the short term, did not just focus on building new ships. Rather, it wanted a renewal, above all qualitative (e.g. through the refit of existing ones). And then, from 2029 onwards, to start receiving giant 8,000-passenger 'cruise' ships. In this sense, a delivery is planned for 2025. While in 2027 and 2028 there will be the launch of the fourth and fifth Excel ships. The programme is in line with the strategy of operational efficiency and debt containment initiated not just today. Carnival, like the entire industry, has been hit hard by Covid. In 2018-19, the financial year before the outbreak of the pandemic, the company's GAAP net profit was 3 billion. In 2019-2020 and 2020-2021, on the contrary, the group posted a loss of 10.2 and 9.5 billion respectively. Gradually, the situation improved until 2022-2023, where the Miami-based group ended the year at break-even (-0.07 billion loss under GAAP accounting). In such a scenario, it is easy to understand why the company has aggressively pursued efficiencies and savings. The effects of the pressure can also be seen in the numbers for the first half of 2024-2025, which ended on 31 May. True! Operating expenses rose to 7.7 billion, about 150 million more than the 7.5 billion in 2024, a change of 2%. And yet - apart from the positive one-off effect of sales of one ship in the North America segment and one in Europe - the cost dynamic nevertheless remained subdued, thanks in part to lower fuel expenses and lower consumption intensity per Albd. As a result, margins increased by 8.5% in the first half of the fiscal year 2024-2025. The gross margin for Albd as of 31 May 2025 was $65.7, whereas a year earlier the indicator had stopped lower at $52.45. These figures - evidently - show that the combination of business expansion and cost pressure is paying off.

 Debt dynamics

Is this trend also noticeable with regard to the company's financial structure? In general, again because of Covid, the company saw its total debt jump - which financial year ago - upwards. According to the Bloomberg terminal, it was at 11.5 billion in 2018 - 2019. Then, the following financial year, the total debt rose to USD 23.4 billion. The rise continued in 2020-2021 and 2021-2022, reaching 34.6 and 35.8 billion, respectively. The peak was in the first quarter of 2022-2023. From there - thanks to the intervention of the group, which, among other things, made repayments of several billion - there was a descent. So much so that, in the last quarter, the ratio of Net Debt to Adjusted Ebitda was 3.7 times. Still not that low, but still lower than the 4.1 times that marked the company in the first quarter of 2024-2025. The effort also implied the improvement of Carnival's own creditworthiness. Moody's, also in the first quarter of 2025, restored the company's investment grade licence (Ba2). Fitch and S&P, with their BB+ Positive and BB+ Stable ratings, respectively, remain on the speculative investment grade by a notch. Apart from this, in the last quarter Carnival points out - however - that it was ahead of some targets. Among others, the 12.6% Adjusted Roic (return on invested capital). An environment that helped to raise estimates for the entire fiscal year. Net Yields are expected to improve from 2023-2024 by about 5% (+4.7% in the previous estimate). Adjusted Ebitda and net profit are, on the other hand, estimated at around EUR 6.9bn and EUR 2.69bn, respectively (EUR 6.7bn and EUR 2.49bn were the numbers indicated in the March guidance). Against this backdrop, the share price reacted positively on the stock exchange. On the day following the publication of the figures, Carnival - which has dual listings in New York and London - rose by 6.9%. A leap which contributed to the share price's rally. Over the past year, the cruise company - according to Bloomberg - has risen 91% (as of 12/9/2025). The trend on the stock exchange - according to Seeking Alpha - has translated into the following multiples. The non-GAAP P/E on 2024-2025 is 16.2 while the non-GAAP PEG is 0.75 (1.79 that of the reference segment). The Price to Sales is 1.56

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