Is Carnival the Best Cruise Stock to Buy Right Now?

Carnival Corporation (CCL) is anticipated to report strong Q3 results on September 29, with Zacks estimating record sales of $8.07 billion and EPS of $1.32, potentially extending its streak of earnings beats. The company's turnaround is driven by robust post-pandemic demand, evidenced by 104% occupancy and reduced discounting, alongside benefits from lower rates for debt refinancing. While its sales growth rate trails some competitors, Carnival is projected to lead in FY25 EPS growth at 42% and offers a compelling valuation at 15.1x forward earnings compared to Royal Caribbean, securing a Zacks Rank #2 (Buy).

Analysis

Carnival Corporation (CCL) is positioned for a strong third-quarter earnings report, driven by sustained post-pandemic consumer demand and operational improvements. Zacks' estimates project record quarterly sales of $8.07 billion and a 4% year-over-year increase in EPS to $1.32, with the ESP model indicating a high probability of another earnings beat, extending an 11-quarter streak. This performance is underpinned by occupancy levels at 104%, which has enabled the company to enhance margins by avoiding heavy discounting. Furthermore, Carnival is benefiting from a more favorable interest rate environment, which aids in refinancing and managing its substantial debt load. While its projected forward sales growth of 6% in FY25 and 4% in FY26 trails competitors Royal Caribbean (RCL) and Norwegian (NCLH), Carnival is expected to lead the sector in current-year EPS growth at an impressive 42%. From a valuation standpoint, CCL appears attractive, trading at 15.1x forward earnings and under 2x forward sales, a significant discount to RCL's 21x earnings and 5.1x sales multiples. This combination of strong near-term earnings momentum and comparatively modest valuation supports its Zacks Rank #2 (Buy) status.

Key Decisions for Investors

• Given the strong operational momentum, a history of significant earnings beats, and a favorable valuation relative to peers, investors could view the upcoming Q3 earnings report as a potential positive catalyst for Carnival.
• For relative value plays within the cruise sector, consider that both Carnival and Norwegian Cruise Line are presented as attractively valued 'Buy'-rated stocks, whereas Royal Caribbean's premium valuation and 'Hold' rating suggest its near-term upside may be fully priced in.
• Despite the bullish short-term outlook, it is crucial to monitor Carnival's progress in managing its debt load and any shifts in consumer spending, as its long-term sales and EPS growth rates are projected to decelerate and trail key competitors.