The year 2021 has been a tough year for cruise operators. Carnival Corporation & plcCCL is not an exception. The shares of CCL have declined by 3.3% in the last year. industry8.7% growth. It is slowly coming out of the woods. Operation resumes and bookings are improving. Carnival will continue to invest in fleet expansion to fuel growth. Lets delve deeper.
Key Growth Drivers
The company has reopened its doors following the coronavirus-induced shut down. The company is currently working on its plan for resuming sailing from Australia and Asia. The company resumed cruise operations with 50 vessels (68% of its fleet capacity) as of fiscal 2021. The company plans to bring its entire fleet back into operation by the spring 2022.
The company announced that book volumes and book positions are both very encouraging. Although the Delta variant had a negative impact on bookings in the first quarter of fiscal 2021 it is reported that the situation has improved and the numbers returned to pre-Delta levels by November. All future cruise booking volumes were higher than those in the third-quarter of 2021 during the fourth quarter.
The company stated that cumulative advance bookings for the second and third quarters of 2022 and the first quarter of 2023 were at the higher ends of historical ranges, and at higher prices compared to 2019. Positives include price maintenance and comparable itineraries. As of Nov 30, 2021 total customer deposits were $3.5 Billion, compared to $3.1 Billion as of Aug 31, 2021. The company plans to capitalize on the momentum and focus on advertising campaigns that include holiday activations for Christmas Day or New Year’s Eve.
Carnival is continuing to invest in fleet expansion to drive its growth. The company announced that it will soon add six LNG-powered ships and AIDAnova to its AIDAcosma system, which is used for travel to Germany. It also announced that it will soon add Costa Firenze and Costa Toscana to the AIDAcosma system along with AIDAnova for Germany-based travel. The company also added Rotterdam, Mardi Gras and Costa Toscana to its fleet. According to the company, the addition of new ships and removal of less efficient vessels will likely lead to a 4% decrease in ship-level unit costs in the upcoming periods. This will increase the top and bottom lines.
The Zacks Rank #3 company (Hold), expects cash flow from operations will turn positive in the early part 2022. It expects to generate more EBITDA in 2023 than it did in 2019, due to increased capacity and a better cost structure.
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The company’s global bookings and operations have been affected by the pandemic. It believes that the coronavirus epidemic will cause delays in ship delivery as the shipyards are also affected. However, it expects a gradual resumption in cruise operations to have a significant impact on all aspects its business, including liquidity, financial position, results of operations, and profitability.
Keeping liquidity in check during the pandemic has been a difficult task for many companies. At the end Nov 30, 2021 the company’s total debt was $33.2 million, compared with $26.8billion as of Aug 31, 2021. It ended the fourth fiscal quarter 2021 with cash and cash equivalent at $9.1billion, compared to $7.2billion in the previous quarter. Although the company’s cash flow has been improving, it may not have enough to manage its high-debt level. The average monthly cash burn was $510 million in the fourth quarter. At the end the fourth quarter fiscal 2021, the company had an average debt-to capital ratio of 0.6.
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Electronic Arts is a Zacks Rank #2. (Buy). On average, the company’s trailing four-quarter earnings surprise is 11.7%. The shares of the company have risen 6.7% over the past month.
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