Barclays has increased its price target on Carnival Corporation (NYSE: NYSE:CCL) shares to $26 from $25, while maintaining an Overweight rating.
The adjustment follows Carnival's report of a 5% upside to third-quarter Cons EBITDA, attributed to yields that were largely in line with expectations and significantly better costs. Additionally, the company's fourth-quarter yield guidance remained unchanged.
Carnival's recent financial results showed another quarter of solid key performance indicators (KPIs). This performance, along with positive commentary on strong demand and pricing for the year 2025, supports Barclays' stance that the market consensus estimates for 2025 may be too low. The firm suggests that these indicators reinforce the potential for upward revisions in future estimates.
Barclays also highlighted the potential impact of Carnival's balance sheet deleveraging on its stock value. The firm anticipates that Carnival's journey towards improving its investment-grade (IG) status could be a significant factor influencing the company's shares.
Barclays posits that if Carnival can achieve approximately 5% yields and 3% costs in 2025, it could end the year with a net debt to EBITDA ratio of approximately 3.5x, based on EBITDA projections of $6.9 to $7.0 billion at current fuel prices.
In other recent news, Carnival Corporation has been making waves in the financial world. Goldman Sachs recently upgraded its price target for Carnival stock to $24, while maintaining a Buy rating.
The upgrade came despite Carnival's Q4 2024 guidance falling slightly short of high investor expectations. The investment bank, however, highlighted several positive trends for the cruise operator, including robust booking and pricing momentum, a 17% increase in new cruise passengers in the quarter, and a 6.4% growth in onboard spending per passenger cruise day.
In addition, Carnival's recent earnings call reported a record-breaking Q3 2024 performance, with revenues reaching almost $8 billion, a significant $1 billion increase from the previous year. The company's net income also surged by over 60%, and it secured nearly 99% of its ticket revenue for the year.
InvestingPro Insights
To complement Barclays' optimistic outlook on Carnival Corporation (NYSE:CCL), recent data from InvestingPro provides additional context to the company's financial position and market performance.
CCL's market capitalization stands at $21.18 billion, reflecting its significant presence in the cruise industry. The company's P/E ratio of 13.48 suggests that investors are willing to pay a moderate premium for its earnings, which aligns with Barclays' positive stance on the stock.
InvestingPro Tips highlight that Carnival is expected to see net income growth this year, supporting Barclays' view on potential upward revisions in future estimates. Additionally, six analysts have revised their earnings expectations upwards for the upcoming period, indicating growing confidence in the company's financial trajectory.
Carnival's revenue for the last twelve months reached $24.48 billion, with a notable revenue growth of 22.18% over the same period. This robust top-line performance underscores the strong demand mentioned in Barclays' analysis. The company's EBITDA growth of 83.7% is particularly impressive, suggesting significant operational improvements that could contribute to the balance sheet deleveraging Barclays anticipates.
It's worth noting that while Carnival does not currently pay a dividend, its focus on improving its financial position aligns with the goal of achieving investment-grade status, as highlighted by Barclays.
For investors seeking a deeper dive into Carnival's financials and prospects, InvestingPro offers additional tips and insights. Currently, there are 7 more InvestingPro Tips available for CCL, providing a comprehensive view of the company's financial health and market position.
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