Demand for cruise ships is a good indicator of economic comfort and a way to measure the impact of the war in Iran on consumer behavior. Carnival is also in the lower income bracket of the cruise ship industry, so it deviates less from the K-shaped economy.
Today’s earnings of 0.41 cents beat the consensus of $0.35, but Q3 expectations fell short of expectations and shares fell 8% before recovering to -5%. Q3 consensus is $1.42 and they guided for $1.35.
CCL Carnival daily
It wasn’t bad, as Carnival said customer deposits reached an all-time high of $9 billion, up more than $450 million from the previous year’s record. They also said bookings for the remainder of 2026 remain ahead of last year and at historically high prices. For the quarter, revenue rose to a record $6.7 billion, slightly above consensus expectations of $6.68 billion.
“What is most remarkable is that we achieved these results despite operating during a period of extreme geopolitical volatility, consumer sentiment at historically low levels and unusually high fuel prices,” CEO Josh Weinstein said.
He said the company was having difficulties with guidance on when the strait would be opened, but demand was still generally good, except in Europe.
“This moderation has been centered on our European deployment, particularly in the Mediterranean region, which has been closest to the conflict, and it has been exacerbated by rising air prices and reduced capacity on international flights for North American guests… Is Europe going to have enough fuel to get my plane home, right? I mean, all of these things, they haven’t really subsided.”
His outlook indicated that the third quarter may eventually beat guidance.
“June has definitely turned a corner, and last week was great… where we signed the MOU and people started thinking, ‘OK, I can start planning my life again.’”
Carnival said it is 93% booked for 2026, with less inventory left for sale than at the same time last year. This is despite its claim to maintain its pricing line even with the decline in demand during the war.
An interesting side note is that the CFO highlighted AI as an earnings driver.
“We are also working with many of our suppliers and vendors to seek discounted rates as everyone applies AI and gains efficiencies in their businesses. We expect fee reductions as a result,” David Bernstein said.
