On Friday, Truist Securities adjusted its financial outlook for Carnival Corporation (NYSE:CCL), raising the company's price target to $30.00 from $29.00 while sustaining a Hold rating on the stock. The revision follows Carnival's fourth-quarter earnings for the 2024 fiscal year. According to InvestingPro data, analysts' targets for the stock range from $14 to $35, with 12 analysts recently revising their earnings expectations upward. The company's stock, currently trading at $25.61, has delivered an impressive 59.27% return over the past year.
Truist Securities cited a change in earnings per share (EPS) estimates as a reason for the updated price target. The firm lowered its 2025 EPS forecast for Carnival to $1.91 from $2.00 but increased its 2026 projection to $2.27 from $2.25. The new price target is based on a 2026 price-to-earnings (P/E) ratio target of 13 times, which remains consistent with previous assessments. Currently trading at a P/E ratio of 15.45, InvestingPro's Fair Value analysis suggests the stock is slightly undervalued. Discover comprehensive valuation insights and 8 additional ProTips with an InvestingPro subscription.
The analyst at Truist Securities highlighted the competitive landscape in the cruise industry, noting the aggressive expansion of MSC, a privately-held, value-priced brand. MSC is targeting Carnival's customer base with competitive pricing and has launched five new ships since 2021, adding over 24,000 berths. Additionally, MSC plans to introduce three more ships between 2025 and 2027, contributing over 15,000 berths. This includes the MSC World America, set to debut next April.
The report also mentioned MSC's significant investment in a new terminal in Miami, anticipated to be the largest in the world. In contrast, Carnival has been more conservative with its fleet expansion, having launched only one ship in 2024 and with no new ships planned for 2025-2026. Instead, Carnival's current strategy focuses on debt reduction rather than capital expenditures on new vessels. The core Carnival brand operates 27 ships, totaling 89,000 berths. This strategic focus appears to be yielding results, with InvestingPro data showing strong financial health metrics and revenue growth of 15.88% in the last twelve months.
Truist Securities underscored MSC's heavy advertising efforts as it continues to penetrate the North American market, posing a challenge to Carnival's customer base. Despite the competitive pressure, the firm's outlook on Carnival remains cautiously optimistic, with a slight increase in the price target reflecting a nuanced view of the company's future financial performance.
In other recent news, Carnival Corporation has been the subject of several analyst notes. Stifel analysts maintained their Buy rating on Carnival and increased their price target to $34, suggesting that the company's yield assumptions for 2025 to 2027 might be too conservative. Stifel's confidence in their estimates remains unshaken, following Carnival's fourth-quarter earnings. Truist Securities also reiterated its Hold rating on Carnival, maintaining a $29 price target. They highlighted Carnival's strategic focus on enhancing its top-performing brands and debt reduction efforts.
In addition, board member Sara Mathew will not seek re-election and will step down from her position in April 2025. Carnival has not specified who would succeed Mathew on the board. Meanwhile, the company concluded the fiscal year 2024 with a net debt to adjusted EBITDA ratio of 4.3x, projecting this figure to decrease to 3.8x by the end of FY2025. The company's booking position is significantly ahead of the historical norm, expected to contribute to record net yields. These are recent developments that investors should take note of.
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