"‘...we made debt payments of $6 billion this year ago, and we still have well over $5 billion of liquidity on top of strong and improving cash flow.’ - Josh Weinstein" - Josh Weinstein
Carnival Corporation plc (CCL) Q4 2023 Results: Strong Momentum and Record Performance
Executive Summary
Carnival Corporation plc (CCL) closed Q4 2023 with record revenues of $5.396 billion, achieving positive adjusted net income for the year, a significant turnaround from previous periods. The demand for cruise vacations remained robust, with record booking levels and customer deposits throughout the quarter. Management reported that they exceeded their financial targets, aided by improved net yields and onboard spending. The company's liquidity stood at over $5 billion, strategically positioning Carnival to manage debt while steering towards investment-grade leverage metrics by 2026. This performance underscores the resilience of the cruise segment and the potential for continued growth as travel demand stabilizes post-pandemic.
Key Performance Indicators
Revenue
5.40B
QoQ: -21.27% | YoY:40.56%
Gross Profit
1.77B
32.70% margin
QoQ: -39.75% | YoY:915.52%
Operating Income
384.00M
QoQ: -76.35% | YoY:133.83%
Net Income
-48.00M
QoQ: -104.47% | YoY:97.00%
EPS
-0.04
QoQ: -104.47% | YoY:97.01%
Revenue Trend
Margin Analysis
Key Insights
**Revenue**: $5.396 billion
**Net Income**: -$48 million (Net Income Margin: -0.89%)
**EBITDA**: $968 million
**Operating Income**: $384 million
**EPS**: -$0.038
Financial Highlights
Q4 2023 Financial Highlights:
- Revenue: $5.396 billion
- Net Income: -$48 million (Net Income Margin: -0.89%)
- EBITDA: $968 million
- Operating Income: $384 million
- EPS: -$0.038
- Gross Profit Margin: 32.7%
- Current Ratio: 0.459
- Debt to Equity Ratio: 4.63
Performance Change (Year-on-Year):
- Revenue growth of 40.56% YoY.
- Net income increased significantly from a loss in the prior year, achieving adjusted net income for the full year despite challenges in fuel costs and foreign currency impacts.
Management highlighted that Q4 net yields were up nearly 8% compared to 2019, and occupancy levels exceeded 101% for both North American and European brands, reinforcing a recovery trend not seen in previous quarters.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
5.40B
40.56%
-21.27%
Gross Profit
1.77B
915.52%
-39.75%
Operating Income
384.00M
133.83%
-76.35%
Net Income
-48.00M
97.00%
-104.47%
EPS
-0.04
97.01%
-104.47%
Key Financial Ratios
currentRatio
0.46
grossProfitMargin
32.7%
operatingProfitMargin
7.12%
netProfitMargin
-0.89%
returnOnAssets
-0.1%
returnOnEquity
-0.7%
debtEquityRatio
4.63
operatingCashFlowPerShare
$0.73
freeCashFlowPerShare
$0.2
dividendPayoutRatio
-41.7%
priceToBookRatio
2.76
priceEarningsRatio
-99.07
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key Management Insights:
- Josh Weinstein, CEO: "It’s safe to say we ended the year on a high note... Achieved record revenues, record booking levels, and record customer deposits. Fourth quarter yields continued on a positive trajectory, significantly higher than a very strong 2019..."
- David Bernstein, CFO: "Our fourth quarter bottom line exceeded the better end of our guidance range as we outperformed our September guidance. The $85 million improvement was driven by favorability in revenue from higher ticket prices."
Themes identified during the earnings call include enhanced customer experience, strong demand across both North American and European markets, and strategic initiatives aimed at improving onboard spending and operational efficiencies.
‘...we made debt payments of $6 billion this year ago, and we still have well over $5 billion of liquidity on top of strong and improving cash flow.’ - Josh Weinstein
— Josh Weinstein
‘Our fourth quarter bottom line exceeded the better end of our guidance range... The $85 million improvement was driven by favorability in revenue from higher ticket prices.’ - David Bernstein
— David Bernstein
Forward Guidance
Carnival expects a capacity increase of about 5.5% in 2024 while forecasting an approximate 8.5% improvement in net yields. Management anticipates EBITDA for 2024 to exceed $5.5 billion, marking a 30% increase year-on-year. Higher ticket prices and improvements in onboard spending are anticipated to solidify these targets. Executives emphasized their commitment to debt reduction and the sustainability of profit margins while addressing inflation dynamics affecting operational costs. Investors should monitor occupancy trends and further metrics associated with Carnival’s SEA Change Program, which aims to enhance fuel efficiency and reduce environmental impact through investments in operational technology and ship enhancements.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CCL Focus
32.70%
7.12%
-0.70%
-99.07%
RCL
32.70%
17.60%
5.87%
29.91%
ABNB
82.70%
-22.40%
-4.27%
-62.22%
EXPE
-1.23%
3.60%
8.60%
39.73%
BKNG
96.30%
12.80%
-8.09%
138.73%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given the robust fourth-quarter performance coupled with forward-looking guidance signaling sustained growth in both occupancy and yield levels, Carnival Corporation appears strategically positioned for recovery. However, with the elevated debt situation, investors should approach with caution and consider monitoring key operational metrics evolving throughout 2024. A conducive macroeconomic environment alongside effective cost management will be vital for achieving targets set forth in management's three-year strategic plan, known as SEA Change.
Key Investment Factors
Growth Potential
Carnival has significantly improved its booking momentum heading into 2024, with nearly two-thirds of its inventory sold at higher prices than previous years. The company captured 3.5 million new-to-cruise guests in 2023, indicating strong market demand.
Profitability Risk
While revenue and demand appear strong, reliance on global travel trends can be affected by geopolitical instability, inflation, and potential economic downturns in key markets. Additionally, ongoing inflation in operational costs and interest rates poses a risk to profitability.
Financial Position
With a solid liquidity position exceeding $5 billion and a focus on debt repayment strategy, Carnival is well-placed to navigate short-term challenges. However, the debt-to-equity ratio of 4.63 indicates substantial leverage, calling for close monitoring as financial performance improves.
SWOT Analysis
Strengths
Strong brand portfolio leading in customer satisfaction and experience in the cruise industry.
Record revenues and improving operational metrics demonstrating recovery from the pandemic.
Robust liquidity position providing safety and flexibility for strategic investments.
Weaknesses
High debt levels impacting financial leverage and interest obligations.
Dependence on consumer discretionary spending which can be affected by economic factors.
Opportunities
Upcoming new ships and renovation projects poised to enhance customer offerings and attract more bookings.
Potential for market share gains from land-based holiday alternatives as consumers lean towards cruise experiences.
Threats
Economic recession risks leading to reduced customer spending on travel and leisure.
Geopolitical risks affecting cruise itineraries and operational safety.