The future for Carnival Corp has gotten much brighter now that the world’s largest cruise ship owner has lifted most testing and vaccine requirements and fuel prices have gone down, an analyst said.
Robin Farley of UBS expects third-quarter results to be “significantly more positive” than this year’s second-quarter $1.9bn loss and next year’s earnings as a result of these factors, she wrote in a note.
She noted that fuel prices have fallen 26% since the company posted second-quarter results on 24 June, savings that may add $0.57 to UBS’ earnings per share estimate for 2023.
“We believe the demand unlock of lifting most testing and vaccine requirements in August will be incrementally positive to ‘23 bookings,” she said.
“Since the vaccine and testing requirements have been lifted, our channel checks indicate very strong demand for last-minute sailings.”
She said booking volumes are usually slow in August and September, but they have actually been much higher compared to the same period in 2019 and 2023 bookings are way ahead of those for 2019 at this time.
“This colour has positive read through for what [Carnival Corp] is likely seeing for bookings,” Farley wrote in the 26 September note.
“And just today, Canada announced that all vaccine and testing requirements for travellers entering Canada have been lifted, so Alaska cruises will no longer have these restrictions.”
UBS expects Carnival’s third-quarter occupancy to reach 90%, ahead of Wall Street’s estimate of 85% and well beyond the second quarter’s occupancy of 69%, partly due to 20 ships getting back up to speed.
“We estimate the removal of testing and vaccine requirements will only save about 1% of operating costs — but the real benefit of it is the demand unlock,” she said.
Pent-up demand was most evident in the Carnival Cruise Line brand having nearly twice the number of bookings on 15 August of this year than it did on the same day in 2019, she said.
“While this press announcement was for the Carnival brand and not all 9 brands of Carnival Corp, it is still a positive sign,” she said.
