Core Insights - Carnival Corporation & plc (CCL) is shifting its strategy towards destination-led growth, focusing on enhancing guest experiences rather than expanding fleet capacity, with projected capacity growth below 1% in fiscal 2026 [1][8] - The company is leveraging its exclusive Caribbean properties to drive yield gains and improve margins, moving towards a sustainable, high-ROI model centered on differentiated vacation experiences [1][4] Destination Strategy - Celebration Key, Carnival's newest private island, opened in mid-2025 and has attracted nearly half a million visitors, generating over 1.5 billion media impressions, indicating strong brand impact [2] - The company plans to expand pier capacity at Celebration Key to accommodate up to four ships simultaneously, enhancing year-round utilization across 20 vessels and 12 home ports [2] - Additional expansions at RelaxAway (Half Moon Cay) and Isla Tropicale (Mahogany Bay) are expected to attract over 8 million guest visits in 2026, nearly matching the entire cruise industry's visitor count [3] Financial Performance - In fiscal 2025, Carnival reported a 4.6% year-over-year increase in net yields, surpassing guidance and achieving record highs on a same-ship basis [4] - With nearly half of 2026 bookings secured at higher prices, Carnival's destination portfolio is positioned to be a sustainable driver of yield growth [4][8] Competitive Landscape - Royal Caribbean Cruises Ltd. (RCL) is leading in destination-driven growth with its Perfect Day series and upcoming Royal Beach Club projects, reporting a constant-currency net yield growth of 5.2% in Q2 2025 [5] - Norwegian Cruise Line Holdings Ltd. (NCLH) is also investing in its private island, Great Stirrup Cay, aiming to increase capacity from approximately 400,000 guests to over 1 million by 2026, projecting a 25-basis-point yield lift in 2026 [6] Stock Performance and Valuation - Carnival's shares have increased by 56.1% over the past six months, outperforming the industry's growth of 23% [9] - CCL trades at a forward price-to-earnings ratio of 11.96X, significantly lower than the industry average of 16.99X [11] - The Zacks Consensus Estimate for CCL's fiscal 2025 and 2026 earnings indicates a year-over-year increase of 49.3% and 12.4%, respectively, with EPS estimates rising in the past 60 days [12]

Core Insights - Sapphire Princess has undergone a two-week drydock in Portland, Oregon, and is set to unveil new guest experiences, including the addition of two specialty restaurants, Makoto Ocean and Crown Grill, starting November 16, 2025 [1][2]. Group 1: New Dining Experiences - Makoto Ocean, featuring Edomae-style sushi by Chef Makoto Okuwa, replaces the former Internet Café on Deck 7, offering a premium menu with items like truffle salmon and toro tartare [2]. - Crown Grill, now located in the former Savoy Dining Room on Deck 5, is recognized as one of the "Best Cruise Ship Steakhouses at Sea," serving premium aged beef and seafood [3]. - Both dining experiences are priced at $60 per person and are included in the Princess Premier package [3]. Group 2: Upcoming Itineraries - Following its revitalization, Sapphire Princess will sail to Mexico, then reposition for South America/Antarctica cruises, and later for Mediterranean and Northern Europe voyages in spring and summer 2026 [4]. - In March 2027, Sapphire Princess will reunite with sister ship Diamond Princess in Japan for an extensive cruise season [5]. Group 3: Company Statements - Sami Kohen, Vice President of Food and Beverage at Princess Cruises, emphasized the enhancement of the culinary journey for guests aboard Sapphire Princess with the addition of the new dining options [6].

Core Insights - Carnival Corporation is experiencing a significant rebound in business, with stock prices increasing over 200% since mid-2020, driven by record revenues and net income in the third quarter [3][4] - Despite the positive performance, the company faces challenges related to its high levels of long-term debt, which currently stands at $25 billion, generating substantial interest expenses [6][8] Business Performance - Carnival's revenue for the third quarter reached a record $8.15 billion, reflecting a year-over-year growth of 3.3%, while net income increased by 6.7% to a record $1.85 billion [3] - The company has achieved 10 consecutive quarters of record revenue, with consumer deposits remaining high at $7.1 billion for the third quarter [4] Market Context - The cruise industry is showing strong demand, contrasting with challenges faced by other sectors of the U.S. tourism industry, such as Las Vegas, which is experiencing a decline in visitors [5] - Macroeconomic factors, including lower interest rates, may support consumer spending in the cruise sector [4] Debt Situation - Carnival has accumulated significant long-term debt due to the pandemic, which has led to equity dilution and cash outflows that could impact investor returns for years [6][7] - The company reported an interest expense of $317 million in the third quarter, highlighting the financial burden of its debt [8]

Industry Overview - The consumer discretionary sector experienced moderate growth in the first three quarters of 2025, with expectations for improvement in the fourth quarter [1] - The sector is growth-oriented, with share prices increasing over the long term and being sensitive to market interest rates [1] Federal Reserve Actions - The Federal Reserve cut the benchmark lending rate by 25 basis points in September 2025, with two more cuts expected this year [2] - Current probabilities for further rate cuts are 95.7% for October and 86.5% for December [2] Impact of Low-Interest Rates - A low-interest rate environment reduces discount rates, increasing the net present value of investments in growth stocks, benefiting sectors like consumer discretionary, technology, and cryptocurrency [3] Recommended Stocks - Five consumer discretionary stocks with favorable Zacks Ranks and solid short-term upside potential are identified: Carnival Corporation & plc (CCL), Norwegian Cruise Line Holdings Ltd. (NCLH), Las Vegas Sands Corp. (LVS), Stride Inc. (LRN), and Planet Fitness Inc. (PLNT) [3][4] Carnival Corporation & plc (CCL) - CCL is benefiting from resilient travel demand, stronger booking trends, and disciplined cost management, leading to an increase in full-year 2025 guidance [7] - Expected revenue and earnings growth rates for CCL are 6.4% and 49.3% for the current year, with a 5.5% improvement in earnings estimates over the last 30 days [10] - The short-term average price target indicates a potential increase of 25.8% from the last closing price of $28.09, with a maximum upside of 53.1% [11] Norwegian Cruise Line Holdings Ltd. (NCLH) - NCLH is experiencing strong consumer demand and solid onboard spending, with record advance ticket sales of $4 billion [12] - Expected revenue and earnings growth rates for NCLH are 6% and 14.8% for the current year, with a 1.5% improvement in earnings estimates over the last seven days [14] - The short-term average price target suggests a potential increase of 32.7% from the last closing price of $23.04, indicating a maximum upside of 86.6% [15] Las Vegas Sands Corp. (LVS) - LVS is benefiting from strong travel demand and improved operating conditions in Macao and Singapore, with a focus on capital investments [16] - Expected revenue and earnings growth rates for LVS are 7.7% and 17.6% for the current year, with a 1.5% improvement in earnings estimates over the last 30 days [17] - The short-term average price target indicates a potential increase of 30.4% from the last closing price of $46.47, with a maximum upside of 58.2% [18] Stride Inc. (LRN) - LRN provides K-12 education and career learning services, with a focus on developing skills for various industries [19][20] - Expected revenue and earnings growth rates for LRN are 10.7% and 8.8% for the current year, with a 2.7% improvement in earnings estimates over the last 30 days [21] - The short-term average price target suggests an increase of 18.5% from the last closing price of $144.99, indicating a maximum upside of 28.3% [22] Planet Fitness Inc. (PLNT) - PLNT is a leading operator of fitness centers, benefiting from higher royalties and new member acquisitions [23] - Expected revenue and earnings growth rates for PLNT are 10.1% and 13.1% for the current year, with a 0.7% improvement in earnings estimates over the last 90 days [25] - The short-term average price target indicates a potential increase of 29.2% from the last closing price of $92.67, with a maximum upside of 88.8% [26]

Stock Picks Overview - Strategists highlight stocks poised for positive returns, focusing on those with strong earnings reports [1] - Two stocks are featured: one in tech (AI play) and one in the cruise line industry [2] Carnival Corporation (CCL) Analysis - Carnival is a Zacks number one ranked stock with an A for VGM, indicating value [3][4] - Stock experienced a dip of over 10% in the past month, potentially creating a buying opportunity [5] - Carnival reported an 83% earnings surprise and has had eight consecutive quarters of record earnings [5][6] - Pre-bookings for the next year are at the same level as last year's record levels, with strong demand seen for 2027 [7] - Carnival offers a variety of cruise lines to meet different price points [8] - Analysts have raised earnings estimates six times for this fiscal year and next year [12] - Earnings are projected to grow 49% this year and 12% next year [13] - The company benefits from lower fuel prices and reduced promotional activity due to strong demand [13][14] - Carnival's valuation includes a forward PE ratio of 13 and a PEG ratio of 06, suggesting both growth and value [14] Micron Technology (MU) Analysis - Micron Technology is a Zacks rank number one strong buy rated stock, benefiting from the AI boom [16] - The stock is up approximately 48% as of the recording and is rebounding after a selloff [17] - BNP Pariba analyst raised the price target by 170% to $270, anticipating a memory super cycle [18] - Fiscal fourth quarter 2025 results showed earnings up 157% year-over-year and revenues up 46% year-over-year [18] - Analysts have been raising estimates for the current quarter and year [20] - The stock is up 125% year-to-date, making it the top-performing chip stock in 2025 [21] - Micron is trading at a forward PE multiple of 1095 times [22]

Core Insights - Carnival Corp. & plc (CCL) has reported another record quarter, with earnings expected to grow by 47.9% this year, indicating strong consumer demand for cruising [1][6]. Financial Performance - Carnival reported earnings of $1.43 for Q3 2025, surpassing the Zacks Consensus estimate of $1.32 by $0.11 [2]. - Revenue reached a record $8.2 billion, an increase of over $250 million from the same quarter last year, marking the 10th consecutive quarter of record revenue [2]. - Gross margin yields increased by 6.4% compared to the previous year [2]. Growth Drivers - Net yields were at an all-time high, 4.6% higher than 2024, driven by strong demand and onboard spending [3]. - The opening of Carnival's exclusive Celebration Key beach destination in the Bahamas is expected to be a growth catalyst for 2026 [3]. Booking Trends - Carnival's booking trends have remained strong, with higher booking volumes than last year and outpacing capacity growth since May [4]. - Nearly half of 2026 has already been booked, aligning with last year's record levels, and historical high prices have been achieved for North America and Europe segments [5]. Guidance and Analyst Sentiment - Carnival raised its net yields guidance for FY2025 to an increase of 5.3% compared to 2024, up 0.3 percentage points from previous guidance [6]. - Analysts have raised earnings estimates for both 2025 and 2026, with the 2025 Zacks Consensus Estimate increasing to $2.10 from $2.00 [6]. Stock Performance - Carnival shares recently reached a new 5-year high but have seen a 10.2% decline over the last 30 days, although they remain up 13.8% year-to-date [9]. - The stock is currently trading at a forward price-to-earnings (P/E) ratio of 13.7, indicating it may be undervalued [12]. - Carnival's PEG ratio stands at 0.6, suggesting a combination of value and growth potential [14].

Core Viewpoint - Carnival Corp. reported strong revenue and earnings for Q3 2025, but the stock experienced a decline post-earnings, raising questions about the market's reaction [1][2][3]. Financial Performance - For Q3 2025, Carnival reported revenue of $8.2 billion, a 3.8% increase from $7.9 billion in Q3 2024, and earnings per share (EPS) of $1.33, up 5.6% from $1.26 [3]. - Consolidated revenue for the quarter was $8.15 billion, exceeding sell-side forecasts of $8.1 billion [3]. Guidance and Future Outlook - The company provided strong guidance updates, indicating robust cruise bookings for 2026 and raising its fiscal year 2025 earnings guidance from $1.97 to $2.14 per share [4]. - Despite the positive outlook, shares fell post-earnings, suggesting investor skepticism or reaction to other factors [4][5]. Debt Offering Context - On the same day as the earnings release, Carnival announced a $1.26 billion debt offering, which initially seemed to trigger the stock's decline [6]. - However, the debt offering is intended to refinance existing higher-yield debt, suggesting a strategic move to lower interest expenses rather than increasing leverage [7][8]. Market Comparison - Carnival's stock trades at a forward P/E ratio of 12, significantly lower than competitor Royal Caribbean's ratio of around 17, indicating potential for valuation improvement [11]. - The reinstatement of dividends by Royal Caribbean contrasts with Carnival's current status, but as Carnival pays down debt, it may also reinstate dividends, enhancing its attractiveness [11][12].

Group 1: Company Overview - Carnival operates as a leisure travel company, providing cruises to approximately 700 ports globally through multiple well-known cruise line brands [2] Group 2: Investment Thesis - Carnival stock is currently trading nearly 11% lower than its 1-year peak and has a price-to-sales (PS) multiple below the average of the last 3 years, indicating it may be undervalued [1] - The company has demonstrated reasonable fundamentals, including a revenue growth rate of 7.1% for the last twelve months (LTM) and an average of 45.9% over the last three years [8] - Carnival maintains a free cash flow margin of approximately 11.1% and an operating margin of 16.4% LTM, suggesting strong cash generation capabilities [8] - The stock trades at a price-to-earnings (PE) multiple of 14.4, which is considered modest given its encouraging fundamentals [8] Group 3: Market Performance and Risks - Carnival has experienced significant market declines in the past, including a 65% drop during the Dot-Com crash and a nearly 69% decline during the Global Financial Crisis [8] - The stock faced an 84% drop due to the Covid pandemic, highlighting its vulnerability to severe market shocks [10] - Despite robust fundamentals, significant sell-offs are inherent risks, as stocks can decline even in favorable market conditions due to events like earnings announcements and business updates [11]

Market Overview - U.S. stock markets have continued to rise in 2025, with major indexes like the Dow, S&P 500, and Nasdaq Composite increasing by 1.9%, 3.5%, and 5.6% respectively in August [1] - The gains are attributed to expectations of further Federal Reserve rate cuts, strong second-quarter earnings, and optimism surrounding artificial intelligence [1][8] Investment Picks - Five stocks with favorable Zacks Rank and momentum for October are Analog Devices Inc. (ADI), Carnival Corp. & plc (CCL), Western Digital Corp. (WDC), DocuSign Inc. (DOCU), and Workday Inc. (WDAY) [2][8] - Each of these stocks has a Zacks Rank 1 (Strong Buy) and a Zacks Momentum Score of A or B [2] Analog Devices Inc. (ADI) - ADI has shown broad-based recovery, margin resilience, and strong free cash flow generation, driven by growth in automation, AI infrastructure, and automotive electrification [5][9] - The company expects a revenue growth rate of 11.8% and an earnings growth rate of 19.4% for the next year [9] Carnival Corp. & plc (CCL) - CCL benefits from resilient travel demand, stronger booking trends, and disciplined cost management, leading to an increase in its full-year 2025 guidance [10][12] - The expected revenue and earnings growth rates for CCL are 6.3% and 47.9% respectively for the current year [12] Western Digital Corp. (WDC) - WDC is experiencing strong demand in the cloud market, with a 36% surge in revenue from this segment, which constitutes 90% of total revenue [13] - The expected revenue growth rate for WDC is -17.8%, while the earnings growth rate is projected at 34.3% for the current year [17] DocuSign Inc. (DOCU) - DOCU's strength lies in its subscription revenues, which have been the majority of its top line, and it continues to grow internationally [18][20] - The expected revenue and earnings growth rates for DOCU are 7.1% and 3.9% respectively for the current year [20] Workday Inc. (WDAY) - WDAY's diversified product portfolio and cloud-based business model are key growth drivers, with significant investments expected to drive innovation [22][24] - The expected revenue and earnings growth rates for WDAY are 12.6% and 21.1% respectively for the current year [24]

Core Insights - Carnival Corporation & plc (CCL) is implementing a significant deleveraging strategy, reducing secured debt by nearly $2.5 billion and refinancing over $11 billion at favorable rates in Q3 FY25, aiming to return to investment-grade credit metrics [1][8] - The company ended Q3 FY25 with a net debt-to-EBITDA ratio of 3.6x, down from 4.3x a year ago, with a target of below 3x by 2026, which has led to a Moody's upgrade and positive outlook [2][8] - Carnival plans to redeem all outstanding convertible notes by year-end, using $500 million in cash and equity, further lowering leverage to 3.5x entering FY26, with expectations of increased free cash flow and reinstating dividends once leverage stabilizes [2][8] Peer Comparisons - Royal Caribbean Cruises Ltd. (RCL) has secured investment-grade ratings and reported liquidity of $7.1 billion, with plans to reduce net leverage to the mid-2x range by the end of 2025, focusing on capital returns and long-term growth [3][4] - Norwegian Cruise Line Holdings Ltd. (NCLH) has reduced net leverage to 5.3x and aims for the mid-4x range by 2026, enhancing liquidity through a 50% expansion of its revolving credit facility [5] Financial Performance - CCL shares have increased by 64.4% over the past six months, outperforming the industry growth of 28.3% [6] - CCL trades at a forward price-to-earnings ratio of 12.51X, significantly below the industry average of 17.58X, indicating potential undervaluation [9] - The Zacks Consensus Estimate for CCL's fiscal 2025 and 2026 earnings suggests a year-over-year increase of 47.9% and 12.9%, respectively, with EPS estimates having risen in the past 60 days [10]