May 26, 2022


Skillful Business Crafters

Why Carnival Stock Dropped After Earnings

Table of Contents

What happened

Shares of cruise-line company Carnival Corporation (NYSE: CCL) fell 2% at 10:45 a.m. ET Tuesday after missing earnings badly in its Q1 2022 report this morning.

Heading into the quarter, analysts already weren’t very optimistic about Carnival’s chances this quarter. The news, however, was even worse than feared. Instead of losing $0.89 per share on $2.3 billion in quarterly sales, Carnival lost $1.66 per share on sales of only $1.6 billion.

Image source: Getty Images.

So what

Comparing Carnival’s Q1 2022 performance to its numbers from when cruise operations were still largely shut down in Q1 2021 isn’t a simple task. Year over year, quarterly revenue rose more than 61 times in Q1 2022 — from $26 million to $1.6 billion — and revenue per passenger cruise day grew 7.5% in comparison to Q1 2019 — a more comparable period for cruising.

The change in Carnival’s losses, however, wasn’t nearly so big. Losses declined just 8% from $1.80 per share a year ago to $1.66 per share this time around — $1.9 billion in net loss for the quarter.

Now what

As of today, Carnival isn’t quite back to normal, but “75% of the company’s capacity” is now back in business. Carnival expects to be back at 100% capacity by summer and earning at least positive “adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization].” Management also noted an “improving trend” in “weekly booking volumes for future sailings,” and predicts that it will be back at “historical levels” by 2023.

That’s the good news. The bad news is that Carnival suffered “an impact on bookings for its near-term sailings, including higher cancellations” in Q1 because of Omicron. This cut Q1 2022 occupancy (as opposed to capacity) down to 54%.

Management believes it has the resources to weather this slump, however, with $7.2 billion in liquidity. Nevertheless, Carnival expects to report another net loss in Q2 before finally turning GAAP profitable again in Q3 — and still end fiscal 2022 with a net loss of unspecified size.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.