CCL stock drops barely above $7.00 as Carnival Corporation reports 10th consecutive quarterly loss
Last Friday, Carnival Corporation forecast a fourth-quarter loss after reporting third-quarter financial results well below Wall Street estimates. Carnival reported a net loss of $770 million for the third quarter of 2022.
Carnival’s revenue has now exceeded expectations for the past ten (10) consecutive quarters dating back to the 2nd quarter of fiscal 2020.
Yes, it’s even worse than it looks. @CarnivalPLC @cruise reported a loss for every quarter since the 2nd quarter of fiscal 2020, with larger-than-expected losses in all but one of those quarters. Revenue has now exceeded expectations for ten (10) consecutive quarters https://t.co/Zei15SzVv3
— James (Jim) Walker (@CruiseLaw) October 1, 2022
Before Carnival announced the disappointing results, there was some hope that the cruise giant would finally return to profitability, but concerns about inflation, and high fuel prices in particular, along with a gargantuan debt of $35,000,000,000 (billions), caused Carnival’s shares to drop to $7.01 before closing at $7.02, a three-decade low.
CCA the stock has fallen almost 90% from its high of over $68 in January 2018.
Carnival’s financial struggles continue despite continued advertising and cheaper fares. The cruise line also recently (in August) abandoned COVID-19 vaccination and testing protocols, resulting in a increased bookings, albeit a more dangerous environment on cruise ships.
obviously involving @CarnivalPLC not only @CarnivalCruise #cruise mark / to be expected with over $35,000,000,000 in debt that it cannot reasonably pay, high inflation and increased costs – despite uninterrupted marketing like #COVID-19[FEMININE[FEMININE keep on going . . .
— James (Jim) Walker (@CruiseLaw) September 30, 2022
The current carnival predicament has happened slowly, but surely, as the pandemic continues. Carnival ended up taking on more than $36,000,000,000 (billions) in debt over the past two years.
Earlier this year, we reported that Carnival was heading for a “perfect storm.”
An analyst (Looking for Alpha) concluded several months ago that although revenues have increased at Carnival Corporation, the company is suffering from “continuing deterioration” and its financial structure is now “completely compromised after 2 years of huge losses. He suggests Carnival’s debt has more than tripled and there are strict covenants limiting corporate maneuvering. Meanwhile, “difficulties related to COVID-19 persist”. He writes of the ongoing effects of COVID-19 on the cruise line:
“To date, very little remains of Carnival 2019. The cruise industry has been hammered by repeated hardships and there is still no end in sight. In 2020, COVID-19 destroyed the whole industry…”
Carnival’s struggles with its huge debt continue to jeopardize its viability.
Another analyst (motley fool) explained the harsh financial reality that Carnival and other cruise lines faced last August:
“Cruise lines are saddled with debt – $36.4 billion at Carnival (as well as $23.8 billion at Royal Caribbean and nearly $14 billion at Norwegian Cruise Line). Interest rates are rising, and the higher they rise, the more expensive it becomes for cruise stocks to service their debt – and the longer it will take for these companies to become profitable again (if they even can).’ (Carnival not only has considerably more debt than its rivals, but many more ships to maintain, equip and staff).
The same analyst further explained that the cost to the cruise lines of servicing the combined debt of over $73,000,000,000 that CCL, RCL and NCLH face is over 11% per annum in interest, an amount that no cruise line has never made a profit in a year.
Carnival and its cruise industry supporters have tried to play down this financial disaster. Carnival posted a misleading message Press releasewhich does not even mention its crushing indebtedness but points out that:
- Revenue increased nearly 80% in Q3 2022 compared to Q2 2022, reflecting continued sequential improvement.
- Occupancy in the third quarter of 2022 increased by 15 percentage points compared to the previous quarter.
- Since the announcement of the company’s relaxed protocols (COVID-19) in mid-August, aligning the company with land holiday alternatives, booking volumes for all future sailings are significantly higher than the high levels of 2019 .
But despite higher bookings and occupancy and increased revenue (compared to previous disastrous quarters), Carnival is still not profitable, no matter how the cruise line tries to present the facts.
Cruise industry publication Cruise Industry News went so far as to publish an article with this fanciful headline: “Carnival Corporation: ‘On course for a great 2023′”
Neglects the question: will @CarnivalPLC / @CarnivalCruise be there in 2023? https://t.co/cyCbSGzcrv #cruise Please explain how Carnival will eventually service existing debt in excess of $35,000,000,000 (billions of dollars) when it has reported losses for each quarter since Q2 of fiscal 2020?
— James (Jim) Walker (@CruiseLaw) October 1, 2022
On the same day Carnival announced its Q3 earnings, it also paid $1,000,000,000 (billion) (some publications say $1,150,000,000) in principal payment and is expected to pay another $9 billion in interest due by 2025.
Carnival, which faces higher fuel and food costs, has been able to attract large numbers of guests to return to its cruise ships, despite the fact that COVID-19 is still infecting large numbers of passengers on every cruise, heavily marketing cheap vacations at sea. But those loyal customers are themselves facing a higher cost of living due to the effects of inflation as Carnival itself struggles under its crippling debt of $35,000,000,000. This unworkable financial house of cards will not continue into 2023, in my view.
It’s only a matter of time before Carnival, which owns nine brands totaling more than ninety ships, sells some of its cruise lines and/or faces involuntary bankruptcy.
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Image credit: Top – Carnival Conquest – NormanEinstein – CC BY-SA 3.0 commons/wikipedia.
Update of October 2, 2022:
Carnival / @CarnivalPLC #CRUISE ruinous financial situation. “There is no silver lining here.” https://t.co/VqmM0TnpaK
— James (Jim) Walker (@CruiseLaw) October 2, 2022
the wall street journal: “Carnival cruise sinks towards $0.”
.@CarnivalPLC #cruise faces serious financial peril as CCL’s stock spins around the drain. It’s ugly now. It will get worse. . . https://t.co/JecqD52BO5
— James (Jim) Walker (@CruiseLaw) October 2, 2022
