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Category: Stock Market and Carnival Corporation
Date: 16 May 2020 Stock Price: $12.78 We take a look at the 1st quarter earnings release of their 2020 fiscal year of Carnival Corporation the world's largest leisure travel company. The stock of Carnival has been hammered by the impact of the coronavirus and its impact on global travel and the tourism industry.
As of March 15, 2020, cumulative advanced bookings for the remainder of 2020, are meaningfully lower than the prior year at prices that are considerably lower than the prior year on a comparable basis, reflecting the impact of COVID-19." |
About Carnival Corporation
Carnival Corporation & plc, the world’s largest leisure travel company, provides travelers around the globe with extraordinary vacations at an exceptional value. The company’s portfolio of global cruise line brands includes Carnival Cruise Line, Holland America Line, Princess Cruises and Seabourn in North America; P&O Cruises (UK) and Cunard in Southampton, England; AIDA Cruises in Rostock, Germany; Costa Cruises in Genoa, Italy; and P&O Cruises (Australia) in Sydney. Additionally, Carnival Corporation owns a tour company that complements its cruise operations: Holland America Princess Alaska Tours which operates in Alaska and the Yukon.
Together, these brands comprise the world’s largest cruise company with a fleet of 102 ships visiting more than 700 ports around the world. A total of 19 new ships are scheduled to be delivered to Carnival Corporation between 2017 and 2022.
Carnival Corporation employs over 120,000 people worldwide and its 10 cruise line brands attract nearly 11.5 million guests annually, which is about 50 percent of the global cruise market. Combining more than 225,000 daily cruise guests and 100,000 shipboard employees, more than 325,000 people are sailing aboard the Carnival Corporation fleet every single day, totaling about 85 million passenger cruise days a year.
Carnival Corporation’s 10 leading brands offer a wide range of vacation experiences for millions of guests with varied leisure-time preferences from multiple backgrounds, cultures and languages. The company’s broad product offerings appeal to travelers of all kinds with many preferences, and consistently provide extraordinary vacation experiences at an outstanding value, especially when compared to similar land-based vacation options.
Together, these brands comprise the world’s largest cruise company with a fleet of 102 ships visiting more than 700 ports around the world. A total of 19 new ships are scheduled to be delivered to Carnival Corporation between 2017 and 2022.
Carnival Corporation employs over 120,000 people worldwide and its 10 cruise line brands attract nearly 11.5 million guests annually, which is about 50 percent of the global cruise market. Combining more than 225,000 daily cruise guests and 100,000 shipboard employees, more than 325,000 people are sailing aboard the Carnival Corporation fleet every single day, totaling about 85 million passenger cruise days a year.
Carnival Corporation’s 10 leading brands offer a wide range of vacation experiences for millions of guests with varied leisure-time preferences from multiple backgrounds, cultures and languages. The company’s broad product offerings appeal to travelers of all kinds with many preferences, and consistently provide extraordinary vacation experiences at an outstanding value, especially when compared to similar land-based vacation options.
Overview of Carnival Corporation's 1st quarter 2020 earnings report
The numbers we are interested in (for the quarter):
- Revenue: $4.789 billion (up from $4.673 billion from the same quarter of the previous year)
- Revenue increased by 2.48% over the last 12 months
- Operating expenses: $3.523 billion (up from $3.142 billion for the same quarter of the previous year)
- Operating expenses increased by 12.1% over the last 12 months
- So some margin squeeze on Carnival as their operating expenses increased at a rate a lot faster than their revenues
- Net loss: -$781 million (down from $336 million for the same quarter of the previous year)
- Diluted loss per share: -$1.14 (down from $0.48 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 685 million (down from 700 million for the same quarter of the previous year)
- Cash and cash equivalents: $1.354 billion
- Cash and cash equivalents per share: $1.97
- Cash and cash equivalents makes up 15.5% of Carnival Corporation's market capital
- Cash and cash equivalents makes up 2.88% of Carnival Corporation's total assets
- Inventories: $440 million
- Inventories makes up 0.94% of Carnival Corporation's total assets
- Stockholders equity of Carnival Corporation: $24.290 billion
- Stockholders equity per share: $35.45
- Carnival Corporation is trading at 0.46 times its stockholders equity which is well outside the expected range of between 2 and 4 which most companies tend to trade at.
- For some perspective the average price to book value that firms in the S&P 500 trade at is 3.7 times. Read more about the S&P 500 here.
- Cash generated from operations: $916 million
- Cash generated from operations per share: $1.34
Carnival Corporation' management commentary on their 1st quarter 2020 earnings report
MIAMI (March 19, 2020) - Carnival Corporation & plc (the “Corporation”) (NYSE/LSE: CCL; NYSE: CUK) disclosed summary financial information for the quarter ended February 29, 2020, in connection with previously disclosed financing activities to improve its liquidity position.
Outlook
For the first half of 2021, booking volumes since the Corporation's last conference call in mid-December through March 1, 2020, have been running slightly higher than the prior year. Also for the first half of 2021 and during the two weeks ended March 15, 2020, the Corporation booked 546,000 Occupied Lower Berth Days (“OLBD”), albeit considerably behind the prior year pace. As of March 15, 2020, cumulative advanced bookings for the first half of 2021, are slightly lower than the prior year.
Wave season started strong with booking volumes for the three weeks ending January 26, 2020, running higher than the prior year for the remaining three quarters of the year on a comparable basis. For the seven week period beginning January 26, 2020 and ending March 15, 2020, booking volumes for the remainder of the year were meaningfully behind the prior year on a comparable basis as a result of the effects of COVID-19. As of March 15, 2020, cumulative advanced bookings for the remainder of 2020, are meaningfully lower than the prior year at prices that are considerably lower than the prior year on a comparable basis, reflecting the impact of COVID-19.
The Corporation previously announced a voluntary, temporary pause of its global fleet operations across all brands. The Corporation believes the ongoing effects of COVID-19 on its operations and global bookings will have a material negative impact on its financial results and liquidity. The Corporation also believes the effects of COVID-19 on the shipyards where its ships are under construction, will result in a delay in ship deliveries. The Corporation is taking additional actions to improve its liquidity, including capital expenditure and expense reductions, and pursuing additional financing. Given the uncertainty of the situation, the Corporation is currently unable to provide an earnings forecast, however it expects a net loss on both a U.S. GAAP and adjusted basis for the fiscal year ending November 30, 2020
Outlook
For the first half of 2021, booking volumes since the Corporation's last conference call in mid-December through March 1, 2020, have been running slightly higher than the prior year. Also for the first half of 2021 and during the two weeks ended March 15, 2020, the Corporation booked 546,000 Occupied Lower Berth Days (“OLBD”), albeit considerably behind the prior year pace. As of March 15, 2020, cumulative advanced bookings for the first half of 2021, are slightly lower than the prior year.
Wave season started strong with booking volumes for the three weeks ending January 26, 2020, running higher than the prior year for the remaining three quarters of the year on a comparable basis. For the seven week period beginning January 26, 2020 and ending March 15, 2020, booking volumes for the remainder of the year were meaningfully behind the prior year on a comparable basis as a result of the effects of COVID-19. As of March 15, 2020, cumulative advanced bookings for the remainder of 2020, are meaningfully lower than the prior year at prices that are considerably lower than the prior year on a comparable basis, reflecting the impact of COVID-19.
The Corporation previously announced a voluntary, temporary pause of its global fleet operations across all brands. The Corporation believes the ongoing effects of COVID-19 on its operations and global bookings will have a material negative impact on its financial results and liquidity. The Corporation also believes the effects of COVID-19 on the shipyards where its ships are under construction, will result in a delay in ship deliveries. The Corporation is taking additional actions to improve its liquidity, including capital expenditure and expense reductions, and pursuing additional financing. Given the uncertainty of the situation, the Corporation is currently unable to provide an earnings forecast, however it expects a net loss on both a U.S. GAAP and adjusted basis for the fiscal year ending November 30, 2020
Capital Resources
As of February 29, 2020, the Corporation had a total of $11.7 billion of liquidity. This included $3.0 billion of immediate liquidity plus $2.8 billion from four committed export credit facilities that are available to fund the originally planned ship deliveries for the remainder of this year and $5.9 billion from committed export credit facilities that are available to fund ship deliveries originally planned in 2021 and beyond. On March 13, 2020, the Corporation fully drew down its $3.0 billion multicurrency revolving credit agreement (“Facility Agreement”). The Corporation borrowed under the Facility Agreement in order to increase its cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 outbreak.
Substantially all of the Corporation's assets, with the exception of certain ships with a net book value of approximately $6 billion as of February 29, 2020, are currently available to be pledged as collateral.
As of February 29, 2020, the Corporation had a total of $11.7 billion of liquidity. This included $3.0 billion of immediate liquidity plus $2.8 billion from four committed export credit facilities that are available to fund the originally planned ship deliveries for the remainder of this year and $5.9 billion from committed export credit facilities that are available to fund ship deliveries originally planned in 2021 and beyond. On March 13, 2020, the Corporation fully drew down its $3.0 billion multicurrency revolving credit agreement (“Facility Agreement”). The Corporation borrowed under the Facility Agreement in order to increase its cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 outbreak.
Substantially all of the Corporation's assets, with the exception of certain ships with a net book value of approximately $6 billion as of February 29, 2020, are currently available to be pledged as collateral.
Carnival Corporation (NYSE: CCL) stock price history
The image below, obtained from Google, shows the stock price history of Carnival Corporation (NYSE: CCL) over the last 5 years. And it's been a very average time for Carnival Corporation (NYSE: CCL). 5 years ago the stock was trading at around $39.60 and its currently trading at $43.58 That's a very modest return of 106% over the last 5 years. The stock is trading at very close to its 52 week low and is far far away from its 52 week high which to us is a clear indication that the short term sentiment and momentum of Carnival Corporation is very negative. And no doubt some of this sentiment is fueled by the collapse of Thomas Cook.
Recent google searches of Carnival Corporation
The graphic below shows the trend in google searches for Carnival stock price and CCL stock price over the last 12 months in the United States as obtained from Google Trends. As the graphic shows there was a massive surge in searches for Carnival stock price and CCL stock price during the whole of March 2020. This coincided with the massive decline in the stock price of Carnival (CCL).
Carnival Corporation (CCL) stock price vs Royal Caribbean Cruises (RCL) stock price
The image below shows the stock price performance over the last three years from CCL and RCL. Over the last 3 years, Royal Caribbean Cruises stock has declined by -68.82% while the stock of Carnival has declined by -80.88% over the same period. And the bulk of these declines were recorded since the start of 2020, when news broke about the spread of coronavirus in China and on various cruise ships. World wide travel bans have seen the demand for RCL and CCL products plummet which has seen the groups struggle to survive
Recent coverage of Carnival Corporation
The extract below covers the latest regarding Carnival as obtained from CruiseTradeNews.com
Carnival Corporation has laid out the company’s redundancy plan, which will include a combination of furloughs, salary reductions and reduced hours.
The company has said these moves will contribute “hundreds of millions of dollars in cash conservation”. The parent of Carnival Cruise Line, P&O Cruises, Cunard, Princess Cruises, Holland America Line, Seabourn, Aida Cruises and Costa Cruises suspended its sailings in March.
Last month, the company completed a successful financing effort with an offering of senior secured notes, senior convertible notes and common stock, netting $6.4 billion of additional liquidity. In a statement, Carnival Corporation said: “To further strengthen our liquidity position in the event of an extended pause in guest operations due to Covid-19, Carnival Corporation and our brands are instituting a combination of layoffs, furloughs, reduced work weeks and salary reductions across the company, including senior management. “The actions in some way affect every shoreside employee in Carnival Corporation and its brands and involve a wide range of professional and skilled employment functions. Job eliminations are permanent.
“The furlough notice is six months, and we have the ability to potentially bring people back from furlough ahead of that time.
Read the full article here
Carnival Corporation has laid out the company’s redundancy plan, which will include a combination of furloughs, salary reductions and reduced hours.
The company has said these moves will contribute “hundreds of millions of dollars in cash conservation”. The parent of Carnival Cruise Line, P&O Cruises, Cunard, Princess Cruises, Holland America Line, Seabourn, Aida Cruises and Costa Cruises suspended its sailings in March.
Last month, the company completed a successful financing effort with an offering of senior secured notes, senior convertible notes and common stock, netting $6.4 billion of additional liquidity. In a statement, Carnival Corporation said: “To further strengthen our liquidity position in the event of an extended pause in guest operations due to Covid-19, Carnival Corporation and our brands are instituting a combination of layoffs, furloughs, reduced work weeks and salary reductions across the company, including senior management. “The actions in some way affect every shoreside employee in Carnival Corporation and its brands and involve a wide range of professional and skilled employment functions. Job eliminations are permanent.
“The furlough notice is six months, and we have the ability to potentially bring people back from furlough ahead of that time.
Read the full article here
Carnival Corporation (NYSE:CCL) latest stock valuation
So based on the earnings report and the gloomy outlook provided by Carnival Corporation (NYSE: CCL) what do we value Carnival Corporation (CL) stock at? Based on Carnival's earnings report in which they reported a significant loss we have decided to value the group at their stockholders equity per share. We therefore have a target price of $35.45. We therefore believe Carnival Corporation is undervalued
We usually recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $35.45. So a good buying price for the stock will be below $31.90 and the stock is currently well below this price. We therefore rate Carnival Corporation a buy. Even with all its difficulties, these tough times for them shall pass and they will recover.
We usually recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $35.45. So a good buying price for the stock will be below $31.90 and the stock is currently well below this price. We therefore rate Carnival Corporation a buy. Even with all its difficulties, these tough times for them shall pass and they will recover.