Carnival shares boosted by record revenues

Shares in Carnival rose 3% after the company unveiled record revenues for 2023. The cruise operator saw full year sales reach an all-time record of $21.6 billion for 2023, thanks to bookings bouncing back post the Covid pandemic.

The company generated $4.3 billion in cash from operations, while adjusted free cash flow came in at $2.1 billion. However, Carnival still made a full-year loss of $74 million. Nevertheless, this was a big improvement on last year’s full-year losses of $6 billion and also better than analysts’ expectations. Losses for the fourth quarter narrowed to $48 million ($1.6 billion: 2022).

Carnival: paying down its debt mountain

The company, which owns cruise lines including P&O, Princess and Cunard, made $6 billion in debt repayments in 2023, cutting its debts by $4.6 billion. Interest payments alone increased from $1.6 billion in 2022 to $2.1 billion. However, Carnival says it finished the year with $5.4 billion in liquidity. At the end of the year, its long-term debts stood at $28.5 billion, down from $32 billion in 2022.

Forward bookings are healthy, say management, with the company starting 2024 in its best-ever position for bookings for price and occupancy, with booking volumes around Black Friday and Cyber Monday hitting an all-time high.

"We ended the year on a high note with another record-breaking quarter that exceeded expectations and achieved positive full year adjusted net income. In fact, we consistently outperformed in all four quarters of the year, buoyed by a strengthening demand environment across all our brands," chief executive officer Josh Weinstein told investors.

"Net yields for the fourth quarter continued on a positive trajectory, were significantly higher than a very strong 2019 and even higher than we had anticipated, enabling us to overcome four years of high cost inflation to deliver five percent higher per unit EBITDA than 2019 (holding fuel and currency constant).”

Carnival steaming ahead of its own financial targets

Weinstein said that Carnival already has nearly two-thirds of 2024 revenues on its books and is “well positioned to obtain another year of record revenues and adjusted EBITDA (earnings before interest, tax, depreciation and amortisation). The company has enjoyed a strong second half of the year and is ahead of its own internal three-year ‘SEA Change’ targets to deliver “the highest adjusted ROIC (return on invested capital) and adjusted EBITDA per ALBD (available lower berth day – a typical package available to customers) in nearly two decades.”

Shares in Carnival have risen 138% this year to 1,358p but are still some way off their three-year highs of 1,765p. However, considering the level of debt the company is still struggling with, and the current high interest rate environment, investors may wish to take some profits.

Past performance is not a guide to future performance.