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Category: Stock Market and Carnival Corporation
Date: 19 June 2020 Stock Price: $18.82 We take a look at the 2nd 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. The group reported they expect to burn $650 million in cash in the 2nd half of their 2020 fiscal year as business will be slow to pick up.
The company expects future capacity to be moderated by the phased re-entry of its ships, the removal of capacity from its fleet and delays in new ship deliveries." |
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.
Quick facts about Carnival Corporation (CCL)
For more about Carnival Corporation read here
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.
Quick facts about Carnival Corporation (CCL)
- Carnival Corporation is listed on the New York Stock Exchange under share code ticker: CCL
- Number of employees: 150 000
- Passengers Carried (in thousands) :12,900
- Passenger Capacity :249,000 lower births
- Number of Ships: 104
- Revenues in 2019: $20.825 billion
- Earnings per share in 2019: $4.32
- Shares in issue: 692 million
- Dividends paid per share in 2019: $2.00
- Stockholders equity in Carnival Corporation: $25.365 billion
- Stockholders equity per share: $36.65
For more about Carnival Corporation read here
Overview of Carnival Corporation's 2nd quarter 2020 earnings report
- U.S. GAAP net loss of $(4.4) billion, or $(6.07) diluted EPS, for the second quarter of 2020, which includes $2.0 billion of non-cash impairment charges.
- Second quarter 2020 adjusted net loss of $(2.4) billion, or $(3.30) adjusted EPS.
- Total revenues for the second quarter of 2020 were $0.7 billion, lower than $4.8 billion in the prior year.
- The company's guest cruise operations have been in a pause for a majority of the second quarter. In addition, the company is unable to definitively predict when it will return to normal operations. As a result, the company is currently unable to provide an earnings forecast. The pause in guest operations is continuing to have material negative impacts on all aspects of the company's business. The longer the pause in guest operations continues the greater the impact on the company's liquidity and financial position. The company expects a net loss on both a U.S. GAAP and adjusted basis for the second half of 2020.
- Cash burn rate in the second quarter 2020 was generally in line with the previously disclosed expectation.
- Second quarter 2020 ended with $7.6 billion of available liquidity, and the company expects to further enhance future liquidity, including through refinancing scheduled debt maturities. In addition, the company has $8.8 billion of committed export credit facilities that are available to fund ship deliveries originally planned through 2023.
- Total customer deposits balance at May 31, 2020 was $2.9 billion, including $475 million related to cruises during the second half of 2020.
Carnival Corporation' management commentary on their 2nd quarter 2020 earnings report
MIAMI, June 18, 2020 /PRNewswire/ -- Carnival Corporation & plc (the "company") disclosed summary preliminary financial information for the quarter ended May 31, 2020.
PREPARATION FOR THE RESUMPTION OF GUEST OPERATIONS
The company expects to resume guest operations, after collaboration with both government and health authorities, in a phased manner, with specific ships and brands returning to service over time to provide its guests with enjoyable vacation experiences. The company anticipates that initial sailings will be from a select number of easily accessible homeports. The company expects future capacity to be moderated by the phased re-entry of its ships, the removal of capacity from its fleet and delays in new ship deliveries.
In connection with its capacity optimization strategy, the company intends to accelerate the removal of ships in fiscal 2020 which were previously expected to be sold over the ensuing years. The company already has preliminary agreements for the disposal of 6 ships which are expected to leave the fleet in the next 90 days and is currently working toward additional agreements.
Health and Safety Protocols
In preparation for the resumption of its cruises, and consistent with its commitment to provide its guests with a safe and healthy environment, the company is proactively consulting and working in close cooperation with various medical policy experts and public health authorities to develop enhanced procedures and protocols for health and safety onboard its ships. The company appreciates the excellent working relationship with the health authorities of federal states and local port authorities in Germany, as well as the Italian Coast Guard, Italian Ministry of Transportation, Italian Ministry of Health and others around the world. A comprehensive restart protocol may include areas such as medical care, screening, testing, mitigation and sanitization addressing arrival and departure at cruise terminals, the boarding and disembarkation process, onboard experiences and shore excursions.
Update on Bookings
The company's brands have announced various incentives and flexibility for certain booking payments on select sailings to support guest confidence in making new bookings. These incentives vary by brand and sailing and include onboard credits and reduced or refundable deposits. In addition, the company is providing flexibility to guests with bookings on sailings cancelled due to the pause by allowing guests to receive enhanced future cruise credits ("FCC") or elect to receive refunds in cash. Enhanced FCCs increase the value of the guest's original booking or provide incremental onboard credits. As of May 31, 2020, approximately half of guests affected have requested cash refunds. Despite substantially reduced marketing and selling spend, the company is seeing growing demand from new bookings for 2021. For the six weeks ending May 31, 2020, approximately two-thirds of 2021 bookings were new bookings. The remaining 2021 booking volumes resulted from guests applying their FCCs to specific future cruises.
As of May 31, 2020, the current portion of customer deposits was $2.6 billion with $121 million relating to third quarter sailings and $353 million relating to fourth quarter sailings. The company expects any decline in the customer deposits balance in the second half of 2020, all of which is expected to occur in the third quarter, to be significantly less than the decline in the second quarter of 2020.
As of May 31, 2020, cumulative advanced bookings for the full year of 2021 capacity currently available for sale are within historical ranges at prices that are down in the low to mid-single digits range including the negative yield impact of FCCs and onboard credits applied, on a comparable basis. For the full year of 2021, booking volumes for the six weeks ending May 31, 2020, were running meaningfully behind the prior year. However, the company saw an improvement in booking volumes for the six weeks ending May 31, 2020 compared to the prior six weeks.
PREPARATION FOR THE RESUMPTION OF GUEST OPERATIONS
The company expects to resume guest operations, after collaboration with both government and health authorities, in a phased manner, with specific ships and brands returning to service over time to provide its guests with enjoyable vacation experiences. The company anticipates that initial sailings will be from a select number of easily accessible homeports. The company expects future capacity to be moderated by the phased re-entry of its ships, the removal of capacity from its fleet and delays in new ship deliveries.
In connection with its capacity optimization strategy, the company intends to accelerate the removal of ships in fiscal 2020 which were previously expected to be sold over the ensuing years. The company already has preliminary agreements for the disposal of 6 ships which are expected to leave the fleet in the next 90 days and is currently working toward additional agreements.
Health and Safety Protocols
In preparation for the resumption of its cruises, and consistent with its commitment to provide its guests with a safe and healthy environment, the company is proactively consulting and working in close cooperation with various medical policy experts and public health authorities to develop enhanced procedures and protocols for health and safety onboard its ships. The company appreciates the excellent working relationship with the health authorities of federal states and local port authorities in Germany, as well as the Italian Coast Guard, Italian Ministry of Transportation, Italian Ministry of Health and others around the world. A comprehensive restart protocol may include areas such as medical care, screening, testing, mitigation and sanitization addressing arrival and departure at cruise terminals, the boarding and disembarkation process, onboard experiences and shore excursions.
Update on Bookings
The company's brands have announced various incentives and flexibility for certain booking payments on select sailings to support guest confidence in making new bookings. These incentives vary by brand and sailing and include onboard credits and reduced or refundable deposits. In addition, the company is providing flexibility to guests with bookings on sailings cancelled due to the pause by allowing guests to receive enhanced future cruise credits ("FCC") or elect to receive refunds in cash. Enhanced FCCs increase the value of the guest's original booking or provide incremental onboard credits. As of May 31, 2020, approximately half of guests affected have requested cash refunds. Despite substantially reduced marketing and selling spend, the company is seeing growing demand from new bookings for 2021. For the six weeks ending May 31, 2020, approximately two-thirds of 2021 bookings were new bookings. The remaining 2021 booking volumes resulted from guests applying their FCCs to specific future cruises.
As of May 31, 2020, the current portion of customer deposits was $2.6 billion with $121 million relating to third quarter sailings and $353 million relating to fourth quarter sailings. The company expects any decline in the customer deposits balance in the second half of 2020, all of which is expected to occur in the third quarter, to be significantly less than the decline in the second quarter of 2020.
As of May 31, 2020, cumulative advanced bookings for the full year of 2021 capacity currently available for sale are within historical ranges at prices that are down in the low to mid-single digits range including the negative yield impact of FCCs and onboard credits applied, on a comparable basis. For the full year of 2021, booking volumes for the six weeks ending May 31, 2020, were running meaningfully behind the prior year. However, the company saw an improvement in booking volumes for the six weeks ending May 31, 2020 compared to the prior six weeks.
Cash Burn Rate
During the pause in guest operations, the monthly average cash burn rate for the second half of 2020 is estimated to be approximately $650 million. This rate includes ongoing ship operating and administrative expenses, committed capital expenditures (net of committed export credit facilities), interest expense and excludes changes in customer deposits and scheduled debt maturities. In addition to the refinancings discussed above and the in-process Debt Holiday arrangements, the company also expects to refinance approximately $2.4 billion of debt maturities coming due over the next twelve months, half of which matures in the second half of 2020.
During the pause in guest operations, the monthly average cash burn rate for the second half of 2020 is estimated to be approximately $650 million. This rate includes ongoing ship operating and administrative expenses, committed capital expenditures (net of committed export credit facilities), interest expense and excludes changes in customer deposits and scheduled debt maturities. In addition to the refinancings discussed above and the in-process Debt Holiday arrangements, the company also expects to refinance approximately $2.4 billion of debt maturities coming due over the next twelve months, half of which matures in the second half of 2020.
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 $48.9 and its currently trading at $18.82. That's a loss of -% suffered by Carnival Corporation stockholders over the last 5 years.
The stock of Carnival Corporation is trading at a lot closer to its 52 week low of $7.80 than it is to its 52 week high of $53.29 which to us is a clear indication that the short term sentiment and momentum of Carnival Corporation is overwhelmingly negative at this point in time.
The stock of Carnival Corporation is trading at a lot closer to its 52 week low of $7.80 than it is to its 52 week high of $53.29 which to us is a clear indication that the short term sentiment and momentum of Carnival Corporation is overwhelmingly negative at this point in time.
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 -46.36% while the stock of Carnival has declined by -71.72% 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 both these cruise ship companies stocks plummet since the start of the year.
Recent coverage of Carnival Corporation
The extract below covers the latest regarding Carnival as obtained from Fool.com
What happened
Cruise line giant Carnival Corporation (NYSE:CCL) reported an honest-to-goodness earnings report this morning, finally giving investors news to trade on that doesn't boil down to vague impressions about whether the coronavirus situation is getting better or worse.
Unfortunately for Carnival, the actual news it had to report was a lot worse than what Wall Street had told investors to expect: Heading into Q2 earnings this morning, Street analysts had forecast a $1.56-per-share loss on revenue of $1.1 billion. What Carnival reported, though, was a $3.30-per-share loss on revenue of just $0.7 billion. Carnival stock promptly plunged 7% in early trading, and remains down 2% as of 11:25 a.m. EDT.
Read the full article here
What happened
Cruise line giant Carnival Corporation (NYSE:CCL) reported an honest-to-goodness earnings report this morning, finally giving investors news to trade on that doesn't boil down to vague impressions about whether the coronavirus situation is getting better or worse.
Unfortunately for Carnival, the actual news it had to report was a lot worse than what Wall Street had told investors to expect: Heading into Q2 earnings this morning, Street analysts had forecast a $1.56-per-share loss on revenue of $1.1 billion. What Carnival reported, though, was a $3.30-per-share loss on revenue of just $0.7 billion. Carnival stock promptly plunged 7% in early trading, and remains down 2% as of 11:25 a.m. EDT.
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 $31.70. 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 $31.70. So a good buying price for the stock will be below $28.50 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 $31.70. So a good buying price for the stock will be below $28.50 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.