Carnival: Likely Cruising To Investment Grade Ahead Of Schedule

2025-03-20 08:15:57 ET

Summary

• Carnival’s leading market share in the cruise industry sets it up to benefit the most from the forecasted industry growth.
• I expect Carnival to outperform its FY 2025 guidance, potentially generating $7.49 billion in EBITDA.
• I’m forecasting Carnival to reduce its debt balance by $3.78 billion in FY 2025, allowing it to exit the year as investment grade, a year ahead of guidance.
• I’m reiterating my buy rating for Carnival stock with a 1-year price target of $43, representing 113% upside from its current valuation.

This time last year, I initiated my coverage on Carnival Corporation & plc ( CCL ) with a buy rating in light of the outstanding recovery of the cruise industry. The company has leveraged this industry recovery to pay off its debt, which remains the largest obstacle to the stock reaching its pre-pandemic levels. With Carnival set to report its Q1 earnings on March 21st, I’ll be sharing my forecast for the company’s revenues, EBITDA, free cash flow, and possible debt repayments in FY 2025. As my forecast sees the company beating its guidance for the current fiscal year and reaching investment-grade leverage metrics a year ahead of guidance, I’m reiterating my buy rating for Carnival with a 1-year price target of $43, implying 113% upside from current levels.

Q1 2025 Overview

On March 21st, Carnival is set to announce its earnings results for Q1 FY 2025. Analysts estimate the company to post revenues of $5.74 billion and an EPS of $0.02 in Q1....

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