In a recent appearance on Schwab Network's the Trading 360 with Marley Kayden, Chris Wang provided expert insights on Carnival's 2Q earnings results.
- If you just read the headlines, you'd think Carnival knocked it out of the park. Adjusted EPS came in at $0.41, crushing street estimates of $0.34. Adjusted EBITDA hit $1.58 billion, well above the $1.48 billion Wall Street expected. Their internal cost controls were fantastic—keeping net cruise costs ex-fuel completely flat. They had a slight miss on the top line. But the reason investors are slamming the brakes today is a massive, unexpected cut to forward guidance
- It’s all about the core health of the business: Net Yields. Carnival just slashed its full-year constant-currency net yield guidance by a massive 100 basis points—dropping it from 2.75% down to 1.75%. This implies an almost 2% cut to second-half net yield growth. Both the fact that they cut it, and the sheer size of the cut, are a total surprise to the market because pricing checks leading into today had looked quite good.
- Carnival admitted that booking trends are only recently starting to see a turnaround from recent headwinds. That caught everyone off guard because their main competitor, Royal Caribbean, noted back in April that European travel trends had already bounced back. Carnival is lagging behind there. Second, they are facing ongoing disruptions from the Middle East conflict. They had to make a close-in decision to redeploy ships away from the Arabian Gulf, and they're eating over 30 basis points in elevated logistics costs just to reroute those voyages.
- The higher full-year EPS is being manufactured by lower fuel spot prices, cost savings, and share buybacks—not by people buying premium cruise tickets. All eyes are on the bookings commentary, and the fact that core yields are shrinking means the market is going to completely look past the Q2 earnings beat today.
