Group 1 - Lincoln Educational Services Corporation (LINC) is part of the Consumer Discretionary group, which consists of 256 companies and currently ranks 10 in the Zacks Sector Rank [2] - LINC has a Zacks Rank of 2 (Buy), indicating a positive outlook, with the consensus estimate for its full-year earnings increasing by 5.9% over the past quarter [3] - Year-to-date, LINC has achieved a return of approximately 45.7%, significantly outperforming the average gain of 11.7% for the Consumer Discretionary sector [4] Group 2 - LINC belongs to the Schools industry, which includes 18 stocks and is currently ranked 11 in the Zacks Industry Rank, with an average gain of 9.2% this year [5] - In comparison, another stock in the Consumer Discretionary sector, Carnival (CCL), has a year-to-date return of 12.8% and is part of the Leisure and Recreation Services industry, which is ranked 79 and has gained 4.4% year to date [4][6]

Core Insights - In times of market volatility, investors often prefer value investing, seizing opportunities to buy undervalued stocks as others sell at lower prices [1][2] Value Investment Strategy - Value investing can lead to "value traps" where stocks underperform due to persistent issues rather than temporary problems [3] - Key metrics for identifying value stocks include dividend yield, P/E ratio, and P/B ratio [3] Importance of PEG Ratio - The PEG ratio, defined as (Price/Earnings)/Earnings Growth Rate, is a crucial metric for assessing a stock's intrinsic value [4][5] - A low PEG ratio is favorable for value investors, but it has limitations, such as not accounting for changing growth rates [5] Screening Criteria for Value Stocks - Effective screening criteria for value stocks include a PEG ratio less than the industry median, a P/E ratio below the industry median, Zacks Rank 1 or 2, market capitalization over $1 billion, average 20-day volume greater than 50,000, and upward earnings estimate revisions greater than 5% [6] Selected Stocks - Carnival Corporation (CCL) has a five-year growth rate of 28.5% and a Zacks Rank 2 with a Value Score of A [7][9] - Harmony Gold Mining (HMY) shows a long-term historical growth rate of 73.4%, a Zacks Rank 1, and a Value Score of B [7][10][11] - Dollar Tree (DLTR) has a five-year expected growth rate of 6.7% and a Zacks Rank 2 with a Value Score of B [7][12][13] - Greif, Inc. (GEF) has a long-term expected earnings growth rate of 9.9%, a Value Score of A, and a Zacks Rank of 1 [7][14]

Market Overview - Wall Street is experiencing a rally, with the S&P 500 and Nasdaq reaching new all-time highs due to eased trade worries and geopolitical tensions [1][6] - The S&P 500 has gained nearly 20% from its April lows and is up 5% year to date, closing at 6,204.95 points [6] - The Nasdaq closed at 20,369.73, also marking a new all-time high [6] Consumer Sentiment - Consumer sentiment has rebounded for the first time in six months, with the Michigan Consumer Sentiment Index rising 16.3% to 60.7 in June from May's 52.2, marking the largest monthly increase in over 30 years [3][9] - This increase in consumer sentiment is attributed to positive developments, including a potential trade deal with China and easing geopolitical tensions in the Middle East [4][5] Federal Reserve Expectations - Market participants are anticipating at least two 25 basis point rate cuts from the Federal Reserve this year, with expectations for the first cut as early as July [7] Consumer Discretionary Stocks - Consumer discretionary stocks such as Interface, Inc. (TILE), Carnival Corporation & plc (CCL), Grand Canyon Education, Inc. (LOPE), and fuboTV Inc. (FUBO) are identified as having strong potential in 2025, each holding a Zacks Rank 2 (Buy) [2][9] - Interface, Inc. has an expected earnings growth rate of 8.2% for the current year, with a 2.6% improvement in earnings estimates over the past 60 days [8] - Carnival Corporation & plc is projected to have a 38% earnings growth rate for the current year, with a 5.8% improvement in earnings estimates over the last 60 days [10] - Grand Canyon Education, Inc. has an expected earnings growth rate of 8.8%, with a 1.3% improvement in earnings estimates over the past 60 days [12] - fuboTV Inc. is expected to see a 69% earnings growth rate for next year, with a 25% improvement in current-year earnings estimates over the past 60 days [13]

Core Insights - Carnival's shares have risen approximately 11% in the past month and nearly 40% over the last 12 months, driven by strong second-quarter results that exceeded expectations [2][3] - The company reported revenue of approximately $6.33 billion, a 9% increase year-over-year, and net income of $565 million, up from $92 million a year ago [2] - Carnival has raised its full-year forecast, projecting adjusted net income to be 40% greater compared to 2024, indicating strong demand for leisure cruising post-Covid-19 [2] Financial Performance - Carnival's revenues have shown significant growth, with a 12.7% increase from $23 billion to $25 billion in the last 12 months, compared to a 5.5% growth for the S&P 500 [6] - The company's quarterly revenues increased by 7.5% to $5.8 billion in the latest quarter from $5.4 billion the previous year, while the S&P 500 saw a 4.8% improvement [7] - Carnival's operating income over the past four quarters was $3.8 billion, reflecting a moderate operating margin of 15.1% [7] Valuation Metrics - Carnival's price-to-sales (P/S) ratio is 1.3 compared to 3.1 for the S&P 500, indicating it may be slightly undervalued [4][6] - The price-to-earnings (P/E) ratio for Carnival stands at 16.4, while the S&P 500's P/E is 26.9, suggesting a more attractive valuation [6] Financial Stability - Carnival's debt was $28 billion at the end of the most recent quarter, with a market capitalization of $34 billion, resulting in a debt-to-equity ratio of 84.4% [8] - The company's cash (including cash equivalents) is $833 million out of total assets of $49 billion, leading to a cash-to-assets ratio of 1.7% [8] Resilience in Downturns - CCL stock has historically performed worse than the S&P 500 during downturns, with significant declines during the Covid pandemic and the inflation shock [9][10][11] - The stock has not yet recovered to its pre-crisis peak values, indicating potential vulnerabilities in economic downturns [10][11]

Core Viewpoint - Carnival is experiencing strong demand and financial recovery, making its stock an attractive investment opportunity despite high debt levels [1][10]. Group 1: Demand and Revenue Growth - Carnival is the largest cruise operator globally, with record demand for its cruises, surpassing pre-pandemic sales levels [2][4]. - In Q2 of fiscal 2025, revenue increased by 8.6% year over year, with total deposits reaching a record $8.5 billion [2][4]. - Operating income nearly doubled year over year to almost $1 billion, and adjusted net income more than tripled, with EPS of $0.35 exceeding expectations [5]. Group 2: Future Investments - Carnival is investing in new ships and upgrades to maintain strong demand, with one new ship scheduled for delivery this year and four more on order for 2027 to 2032 [6][7]. - The company is launching a new resort, Celebration Key, in the Bahamas, which can accommodate two million guests annually, enhancing its offerings [8]. - Additional experiences, RelaxAway and Isla Tropicale, are set to launch next year, along with a new membership program to drive repeat business [9]. Group 3: Debt Management and Financial Stability - Carnival's total debt stands at over $27 billion, down nearly $10 billion from its peak of $32 billion at the end of 2022, with efficient debt repayment strategies [10]. - The company received upgrades from Fitch and S&P Global, now just one notch away from an investment-grade rating, indicating improved financial health [11]. - Carnival's stock trades at a forward P/E ratio of 12 and a P/S ratio of just over 1, suggesting it is undervalued [11].

Group 1: Carnival - Carnival is experiencing strong demand and financial performance, with fiscal Q2 revenue reaching $6.3 billion, leading to a trailing-12-month revenue of $25.4 billion, surpassing pre-pandemic levels of $20.8 billion in fiscal 2019 [3][5] - The stock price has more than doubled in the past three years, and the current forward price-to-earnings multiple is 12.5, indicating potential for further shareholder returns through improved margins [4] - Adjusted net income for Carnival exceeded guidance at $470 million, with expectations to reach $2.7 billion for the full year, up from $1.9 billion last year [5] - The launch of Celebration Key as a new cruise destination is expected to drive profitable growth, with attractions designed to enhance guest experience and increase ticket prices and margins [6][7] - Wall Street is underestimating Carnival's transformation into a brand that offers exclusive destinations, which could lead to attractive returns for shareholders [8] Group 2: Nintendo - Nintendo's stock has seen significant appreciation, with a 338% increase since late 2016, outperforming the S&P 500's 172% return [9] - The video game industry is valued at $180 billion, with Nintendo owning valuable intellectual properties like Mario Bros and Zelda, and the Switch console achieving record sales of 152 million units [10] - The recent launch of Switch 2 has been successful, selling over 3.5 million units in the first four days, indicating strong market demand [10] - While hardware sales are low-margin, Nintendo expects to sell more games for Switch 2 than the original Switch sold in its first 10 months, setting the stage for strong earnings growth [11] - Analysts have a price target of $34.90 for Nintendo, suggesting a 52% upside from the current share price of $23, with sales expected to double this year [13]

Core Insights - Consumer demand for experiential travel is rebounding, benefiting cruise operators like Carnival Corporation & plc (CCL) and Royal Caribbean Cruises Ltd. (RCL) [1] - Both companies are leveraging strong brand portfolios and improving fundamentals to capitalize on elevated demand and pricing power [1] Carnival Corporation (CCL) - Carnival is achieving robust yield growth and operational momentum, exceeding its 2026 targets for EBITDA per berth growth and return on invested capital 18 months ahead of schedule [3] - The company is set to launch Celebration Key, a flagship private Caribbean destination, and is enhancing its "Paradise Collection" strategy with upgrades to existing destinations [4] - Carnival is revamping its fleet and launching a new loyalty program, Carnival Rewards, expected to boost guest engagement [5] - Financially, Carnival has refinanced $7 billion of debt and improved its net debt-to-EBITDA ratio from 4.1x to 3.7x in Q2 2025, focusing on regaining investment-grade status [6] Royal Caribbean Cruises Ltd. (RCL) - Royal Caribbean is executing its "Perfecta Performance" strategy, reporting yield growth of 5.6% and a 35% EBITDA margin in Q1 2025, driven by strong demand and pricing power [7] - The company is expanding its exclusive destination portfolio with the Royal Beach Club in Nassau, aimed at enhancing guest engagement and boosting ancillary revenues [8] - RCL's digital initiatives, including a widely adopted mobile app, are improving direct bookings and revenue capture [9] - However, RCL faces near-term cost pressures related to ship deployment and elevated expenses tied to destination rollouts and dry dock activities [10] Financial Performance and Valuation - The Zacks Consensus Estimate for Carnival's fiscal 2025 sales and EPS suggests increases of 5.4% and 38%, respectively, with earnings estimates rising 3.8% in the past 60 days [11] - For Royal Caribbean, the estimates indicate year-over-year increases of 9.4% in sales and 30.7% in EPS, with a 6% rise in earnings estimates over the same period [13] - Carnival stock has increased by 31.7% over the past three months, while Royal Caribbean shares have risen by 42.6% [15] - Carnival's forward P/E ratio is 12.92X, below the industry average of 18.59X, while RCL's is 17.92X [18] Investment Outlook - Carnival presents a more attractive near-term buying opportunity due to operational efficiency and financial gains, while RCL may require a wait-and-see approach due to cost pressures [27][28]

Core Insights - Carnival's international operations are crucial for assessing its financial strength and growth potential [1][2] - The company's total revenue for the quarter was $6.33 billion, a 9.5% increase year-over-year [4] International Revenue Trends - Australia contributed $315 million, or 4.98% of total revenue, which was an 11.19% miss against expectations of $354.7 million [5] - Other International markets generated $275 million, accounting for 4.35% of total revenue, exceeding the estimate of $212.65 million by 29.32% [6] - Europe represented 31.04% of total revenue, translating to $1.96 billion, surpassing expectations by 4.11% [7] Revenue Forecasts - For the current fiscal quarter, total revenue is projected at $8 billion, a 1.3% increase year-over-year, with contributions expected from Australia (6.3%), Other International (3.6%), and Europe (30%) [8] - For the full year, total revenue is anticipated to reach $26.37 billion, reflecting a 5.4% increase, with regional contributions from Australia (6.4%), Other International (4%), and Europe (29.3%) [9] Market Performance - Carnival's stock has increased by 13% over the past month, outperforming the S&P 500's 6% increase [13] - Over the past three months, the company's shares rose by 51.5%, compared to a 7.9% increase in the S&P 500 [13]

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements: income, comprehensive income, balance sheets, cash flows, equity, and detailed notes [Consolidated Statements of Income (Loss)](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20%28Loss%29) Presents the consolidated statements of income (loss) for the three and six months ended May 31, 2025 and 2024 | Metric | 3 Months Ended May 31, 2025 (Millions) | 3 Months Ended May 31, 2024 (Millions) | 6 Months Ended May 31, 2025 (Millions) | 6 Months Ended May 31, 2024 (Millions) | | :----- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Revenues | $6,328 | $5,781 | $12,139 | $11,187 | | Operating Income | $934 | $560 | $1,477 | $836 | | Net Income (Loss) | $565 | $92 | $486 | $(123) | | Basic EPS | $0.43 | $0.07 | $0.37 | $(0.10) | | Diluted EPS | $0.42 | $0.07 | $0.37 | $(0.10) | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Details the consolidated statements of comprehensive income (loss) for the three and six months ended May 31, 2025 and 2024 | Metric | 3 Months Ended May 31, 2025 (Millions) | 3 Months Ended May 31, 2024 (Millions) | 6 Months Ended May 31, 2025 (Millions) | 6 Months Ended May 31, 2024 (Millions) | | :----- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Net Income (Loss) | $565 | $92 | $486 | $(123) | | Other Comprehensive Income (Loss) | $233 | $18 | $221 | $19 | | Total Comprehensive Income (Loss) | $798 | $110 | $708 | $(104) | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Provides the consolidated balance sheets as of May 31, 2025, and November 30, 2024, detailing assets, liabilities, and equity | Metric | May 31, 2025 (Millions) | November 30, 2024 (Millions) | | :----- | :---------------------- | :--------------------------- | | Total Assets | $51,165 | $49,057 | | Total Current Assets | $4,349 | $3,378 | | Total Current Liabilities | $12,920 | $11,617 | | Total Debt (net of unamortized costs) | $27,254 | $27,475 | | Customer Deposits | $8,082 | $6,425 | | Total Shareholders' Equity | $10,007 | $9,251 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Outlines the consolidated statements of cash flows for the six months ended May 31, 2025 and 2024, across operating, investing, and financing activities | Activity | 6 Months Ended May 31, 2025 (Millions) | 6 Months Ended May 31, 2024 (Millions) | | :------- | :------------------------------------- | :------------------------------------- | | Net cash provided by (used in) operating activities | $3,317 | $3,807 | | Net cash provided by (used in) investing activities | $(1,191) | $(3,384) | | Net cash provided by (used in) financing activities | $(1,211) | $(1,183) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $940 | $(767) | | Cash, cash equivalents and restricted cash at end of period | $2,171 | $1,669 | [Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Presents the consolidated statements of shareholders' equity as of May 31, 2025, May 31, 2024, November 30, 2024, and November 30, 2023 | Metric | At May 31, 2025 (Millions) | At May 31, 2024 (Millions) | At November 30, 2024 (Millions) | At November 30, 2023 (Millions) | | :----- | :------------------------- | :------------------------- | :------------------------------ | :------------------------------ | | Total Shareholders' Equity | $10,007 | $6,814 | $9,251 | $6,882 | | Retained Earnings | $2,543 | $62 | $2,101 | $185 | | Accumulated Other Comprehensive Income (Loss) | $(1,753) | $(1,919) | $(1,975) | $(1,939) | [Notes to Consolidated Financial Statements](index=9&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Provides detailed explanatory notes to the consolidated financial statements, covering accounting policies, debt, contingencies, and other financial disclosures [NOTE 1 – General](index=9&type=section&id=NOTE%201%20%E2%80%93%20General) Outlines the basis of presentation for interim financial statements, including estimates, seasonality, brand realignment, and new accounting pronouncements - Brand Realignment: In March 2025, the P&O Cruises (Australia) brand was **sunset**, with operations folded into Carnival Cruise Line[23](index=23&type=chunk) - New Accounting Pronouncements: The company is evaluating new FASB guidance on Segment Reporting (effective 2025/2026), Income Tax Disclosures (effective 2026), Debt with Conversion Options (effective 2027), and Expense Disaggregation (effective 2028)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) [NOTE 2 – Revenue and Expense Recognition](index=10&type=section&id=NOTE%202%20%E2%80%93%20Revenue%20and%20Expense%20Recognition) Details policies for revenue and expense recognition, including guest cruise deposits, advance onboard purchases, and contract costs | Metric | May 31, 2025 (Millions) | November 30, 2024 (Millions) | | :----- | :---------------------- | :--------------------------- | | Total Customer Deposits | $8,500 | $6,800 | | Incremental Costs of Obtaining Contracts | $445 | $336 | [NOTE 3 – Debt](index=11&type=section&id=NOTE%203%20%E2%80%93%20Debt) Provides a detailed breakdown of the company's debt structure, including maturities, interest rates, new facilities, and recent issuances/redemptions | Metric | May 31, 2025 (Millions) | November 30, 2024 (Millions) | | :----- | :---------------------- | :--------------------------- | | Total Debt | $27,967 | $28,213 | | Long-Term Debt | $25,862 | $25,936 | | Current Portion of Long-Term Debt | $1,392 | $1,538 | - New Revolving Facility: In June 2025, a **$4.5 billion** unsecured multi-currency revolving credit facility was entered, replacing the previous one and maturing in June 2030[37](index=37&type=chunk) - Debt Refinancing Activities in 2025: - Issued **$1.0 billion** of 5.75% senior unsecured notes due 2030 to redeem 10.50% notes due 2030 - Issued **$2.0 billion** of 6.13% senior unsecured notes due 2033 to redeem 10.38% senior priority notes due 2028 - Issued **$1.0 billion** of 5.88% senior unsecured notes due 2031 to redeem 7.63% senior unsecured notes due 2026[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) | Metric | 3 Months Ended May 31, 2025 (Millions) | 6 Months Ended May 31, 2025 (Millions) | | :----- | :------------------------------------- | :------------------------------------- | | Debt Extinguishment and Modification Costs | $4 | $255 | - Covenant Compliance: As of May 31, 2025, the company was in **compliance with all applicable covenants** under its debt agreements, including minimum interest coverage and liquidity[48](index=48&type=chunk)[50](index=50&type=chunk) [NOTE 4 – Contingencies and Commitments](index=15&type=section&id=NOTE%204%20%E2%80%93%20Contingencies%20and%20Commitments) Details ongoing legal proceedings, regulatory inquiries, contingent obligations, including Helms-Burton Act lawsuit, COVID-19 class actions, and ship commitments - Helms-Burton Act Lawsuit: A **$110 million judgment** against Carnival Corporation was reversed, with the company believing the ultimate outcome will not have a material impact[54](index=54&type=chunk) - COVID-19 Class Actions: Courts in Australia and Italy found limited liability or rejected most claims, with the company believing the ultimate outcome will not have a material impact[54](index=54&type=chunk) | Year Ending November 30 | New Ship Growth Capital Commitments (Billions) | | :---------------------- | :--------------------------------------------- | | Remainder of 2025 | $0.9 | | 2026 | $0.5 | | 2027 | $1.6 | | 2028 | $1.4 | | 2029 | $1.8 | | Thereafter | $6.3 | [NOTE 5 – Fair Value Measurements, Derivative Instruments and Hedging Activities and Financial Risks](index=16&type=section&id=NOTE%205%20%E2%80%93%20Fair%20Value%20Measurements%2C%20Derivative%20Instruments%20and%20Hedging%20Activities%20and%20Financial%20Risks) Discusses fair value measurements, derivative instruments for hedging, and strategies for managing fuel price, foreign currency, and interest rate risks | Metric | May 31, 2025 (Millions) | November 30, 2024 (Millions) | | :----- | :---------------------- | :--------------------------- | | Total Debt (Carrying Value) | $27,967 | $28,213 | | Total Debt (Fair Value) | $28,309 | $28,927 | - Derivative Instruments: As of May 31, 2025, interest rate swaps converted **$1.0 billion** of SOFR-based variable rate debt to fixed rate debt, designated as cash flow hedges[71](index=71&type=chunk) - Risk Management Strategies: - Fuel Price Risks: Managed through fleet optimization, energy efficiency, and new technologies/alternative fuels - Foreign Currency Exchange Rate Risks: Managed through operating/financing activities, netting exposures, and derivative instruments - Interest Rate Risks: Managed through debt portfolio management and investment strategies, including interest rate swaps[73](index=73&type=chunk)[74](index=74&type=chunk)[78](index=78&type=chunk) [NOTE 6 – Segment Information](index=20&type=section&id=NOTE%206%20%E2%80%93%20Segment%20Information) Provides financial information by reportable segment, detailing revenues, operating expenses, and operating income for specified periods Operating Income by Segment (Millions) | Segment | 3 Months Ended May 31, 2025 | 3 Months Ended May 31, 2024 | 6 Months Ended May 31, 2025 | 6 Months Ended May 31, 2024 | | :------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | North America | $691 | $525 | $1,207 | $797 | | Europe | $368 | $168 | $508 | $288 | | Consolidated | $934 | $560 | $1,477 | $836 | Revenue by Geographic Area (Millions) | Geographic Area | 6 Months Ended May 31, 2025 | 6 Months Ended May 31, 2024 | | :-------------- | :-------------------------- | :-------------------------- | | North America | $7,243 | $6,663 | | Europe | $3,590 | $3,199 | | Australia | $735 | $781 | [NOTE 7 – Earnings Per Share](index=22&type=section&id=NOTE%207%20%E2%80%93%20Earnings%20Per%20Share) Presents the calculation of basic and diluted earnings per share, including net income, weighted-average shares, and dilutive effects | Metric | 3 Months Ended May 31, 2025 | 3 Months Ended May 31, 2024 | 6 Months Ended May 31, 2025 | 6 Months Ended May 31, 2024 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $0.43 | $0.07 | $0.37 | $(0.10) | | Diluted EPS | $0.42 | $0.07 | $0.37 | $(0.10) | - Antidilutive Securities: For the six months ended May 31, 2025, **84 million** Convertible Notes were excluded from diluted EPS computations as they were antidilutive[87](index=87&type=chunk) [NOTE 8 – Supplemental Cash Flow Information](index=22&type=section&id=NOTE%208%20%E2%80%93%20Supplemental%20Cash%20Flow%20Information) Provides a reconciliation of cash and cash equivalents from balance sheets to total cash, cash equivalents, and restricted cash | Metric | May 31, 2025 (Millions) | November 30, 2024 (Millions) | | :----- | :---------------------- | :--------------------------- | | Cash and cash equivalents | $2,146 | $1,210 | | Restricted cash | $25 | $21 | | Total cash, cash equivalents and restricted cash | $2,171 | $1,231 | [NOTE 9 – Property and Equipment](index=22&type=section&id=NOTE%209%20%E2%80%93%20Property%20and%20Equipment) Reports on ship sales completed in 2025, detailing passenger capacity reduction and continued operation under bareboat charter agreements - Ship Sales in 2025: The company completed sales of one North America segment ship (**460 berths**) and one Europe segment ship (**2,700 berths**), reducing passenger capacity[89](index=89&type=chunk) - Continued Operation: Sold North America segment ship will operate through May 2026, and Europe segment ship through September 2026, under bareboat charter agreements[89](index=89&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on financial condition and results, including forward-looking statements, accounting estimates, seasonality, trends, and detailed analysis of revenues and expenses [Cautionary Note Concerning Factors That May Affect Future Results](index=23&type=section&id=Cautionary%20Note%20Concerning%20Factors%20That%20May%20Affect%20Future%20Results) Highlights forward-looking statements and outlines significant risks and uncertainties, including geopolitical events, regulatory changes, climate change, cybersecurity, and substantial debt - Key Risk Factors: Include geopolitical uncertainty, pandemics, inflation, higher fuel prices and interest rates, regulatory changes, climate change, cybersecurity, and substantial debt[91](index=91&type=chunk) - Debt Amplification: Many identified risks are amplified by the **substantial debt balance** incurred during the pause of guest cruise operations[92](index=92&type=chunk) [New Accounting Pronouncements](index=24&type=section&id=New%20Accounting%20Pronouncements) Refers to Note 1 of the consolidated financial statements for discussion of new accounting pronouncements - Reference to Note 1: Additional discussion regarding new accounting pronouncements is in Note 1 - "General, Accounting Pronouncements" of the consolidated financial statements[95](index=95&type=chunk) [Critical Accounting Estimates](index=24&type=section&id=Critical%20Accounting%20Estimates) Directs readers to the Form 10-K for a discussion of critical accounting estimates, with no new changes in the interim report - Reference to Form 10-K: Critical accounting estimates are discussed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Form 10-K[96](index=96&type=chunk) [Seasonality](index=24&type=section&id=Seasonality) Explains the seasonal nature of passenger ticket revenues, with highest demand in the third quarter and impact from planned maintenance - Seasonal Demand: Cruise demand is **highest in the third quarter**, leading to higher ticket prices, occupancy, and operating income[97](index=97&type=chunk) - Impact of Maintenance: Results are affected by ships taken out-of-service for planned maintenance during non-peak seasons[97](index=97&type=chunk) [Known Trends and Uncertainties](index=24&type=section&id=Known%20Trends%20and%20Uncertainties) Identifies key trends and uncertainties, including fuel cost volatility and the increasing impact of the EU Emissions Trading System (ETS) - Fuel Cost Volatility: Volatility in fuel costs is reasonably likely to impact profitability in both the short and long-term[98](index=98&type=chunk) - EU Emissions Trading System (ETS): Subject to EU ETS since January 1, 2024, with a three-year phase-in; 2024 impact was **$46 million** (40% of emissions)[98](index=98&type=chunk) [Statistical Information](index=25&type=section&id=Statistical%20Information) Provides key operational statistics for the three and six months ended May 31, 2025 and 2024, including PCDs, ALBDs, occupancy, and fuel data | Metric | 3 Months Ended May 31, 2025 | 3 Months Ended May 31, 2024 | 6 Months Ended May 31, 2025 | 6 Months Ended May 31, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Passenger Cruise Days (PCDs) (in millions) | 25.3 | 24.3 | 49.6 | 47.8 | | Available Lower Berth Days (ALBDs) (in millions) | 24.2 | 23.5 | 47.8 | 46.5 | | Occupancy percentage | 104 % | 104 % | 104 % | 103 % | | Passengers carried (in millions) | 3.4 | 3.3 | 6.5 | 6.3 | | Fuel consumption in metric tons (in millions) | 0.7 | 0.7 | 1.4 | 1.5 | | Fuel cost per metric ton consumed | $614 | $684 | $628 | $685 | - Capacity Increase (3 months): ALBDs increased by **3.1%**, with North America up **0.3%** and Europe up **8.4%**[102](index=102&type=chunk) - Capacity Increase (6 months): ALBDs increased by **2.8%**, with North America up **2.9%** and Europe up **2.6%**[103](index=103&type=chunk) [Three Months Ended May 31, 2025 Compared to Three Months Ended May 31, 2024](index=26&type=section&id=Three%20Months%20Ended%20May%2031%2C%202025%20Compared%20to%20Three%20Months%20Ended%20May%2031%2C%202024) Analyzes financial performance for the three months ended May 31, 2025 vs 2024, covering revenues, operating expenses, and income [Revenues](index=26&type=section&id=Revenues%20%28Three%20Months%29) Consolidated total revenues increased by **$547 million (9.5%)** to **$6.3 billion**, driven by higher passenger ticket and onboard revenues | Revenue Type | 3 Months Ended May 31, 2025 (Millions) | 3 Months Ended May 31, 2024 (Millions) | Change (Millions) | Change (%) | | :------------- | :------------------------------------- | :------------------------------------- | :---------------- | :--------- | | Passenger ticket | $4,104 | $3,754 | $351 | 9.3% | | Onboard and other | $2,224 | $2,027 | $197 | 9.7% | | Total Revenues | $6,328 | $5,781 | $547 | 9.5% | - Passenger ticket revenue increased by **$169 million** from higher ticket prices, **$115 million** from **3.1%** capacity increase, and **$51 million** from favorable foreign currency translation[109](index=109&type=chunk) - Onboard and other revenue increased by **$128 million** from higher guest spending and **$37 million** from a **3.1%** capacity increase[107](index=107&type=chunk) [Operating Expenses](index=27&type=section&id=Operating%20Expenses%20%28Three%20Months%29) Consolidated operating expenses increased by **$89 million (2.3%)** to **$3.9 billion**, driven by capacity, maintenance, and onboard costs, partially offset by ship sales and lower fuel prices | Expense Type | 3 Months Ended May 31, 2025 (Millions) | 3 Months Ended May 31, 2024 (Millions) | Change (Millions) | Change (%) | | :------------- | :------------------------------------- | :------------------------------------- | :---------------- | :--------- | | Cruise and tour operating expenses | $3,886 | $3,798 | $88 | 2.3% | | Selling and administrative | $816 | $789 | $27 | 3.4% | | Depreciation and amortization | $692 | $634 | $58 | 9.1% | | Total Operating Expenses | $5,394 | $5,221 | $173 | 3.3% | - Key increases in operating expenses included **$101 million** from capacity, **$72 million** from repair and maintenance, **$31 million** from onboard costs, and **$31 million** from unfavorable foreign currency translation[120](index=120&type=chunk) - These increases were partially offset by **$103 million** gains on ship sales, **$40 million** lower fuel prices, and **$32 million** lower fuel consumption per ALBD[120](index=120&type=chunk) [Operating Income](index=28&type=section&id=Operating%20Income%20%28Three%20Months%29) Consolidated operating income significantly increased by **$374 million** to **$934 million**, driven by positive revenue and expense trends across segments | Segment | 3 Months Ended May 31, 2025 (Millions) | 3 Months Ended May 31, 2024 (Millions) | Change (Millions) | | :------------ | :------------------------------------- | :------------------------------------- | :---------------- | | Consolidated | $934 | $560 | $374 | | North America | $691 | $525 | $166 | | Europe | $368 | $168 | $200 | [Nonoperating Income (Expense)](index=28&type=section&id=Nonoperating%20Income%20%28Expense%29%20%28Three%20Months%29) Interest expense, net of capitalized interest, decreased by **$109 million** due to lower debt and rates; debt extinguishment costs also decreased | Metric | 3 Months Ended May 31, 2025 (Millions) | 3 Months Ended May 31, 2024 (Millions) | Change (Millions) | | :---------------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Interest expense, net of capitalized interest | $(341) | $(450) | $109 | | Debt extinguishment and modification costs | $(4) | $(33) | $29 | [Six Months Ended May 31, 2025 Compared to Six Months Ended May 31, 2024](index=28&type=section&id=Six%20Months%20Ended%20May%2031%2C%202025%20Compared%20to%20Six%20Months%20Ended%20May%2031%2C%202024) Analyzes financial performance for the six months ended May 31, 2025 vs 2024, covering revenues, operating expenses, and income [Revenues](index=28&type=section&id=Revenues%20%28Six%20Months%29) Consolidated total revenues increased by **$952 million (8.5%)** to **$12.1 billion**, driven by higher passenger ticket and onboard revenues | Revenue Type | 6 Months Ended May 31, 2025 (Millions) | 6 Months Ended May 31, 2024 (Millions) | Change (Millions) | Change (%) | | :------------- | :------------------------------------- | :------------------------------------- | :---------------- | :--------- | | Passenger ticket | $7,936 | $7,370 | $566 | 7.7% | | Onboard and other | $4,202 | $3,817 | $385 | 10.1% | | Total Revenues | $12,139 | $11,187 | $952 | 8.5% | - Passenger ticket revenue increased by **$320 million** from higher ticket prices, **$207 million** from **2.8%** capacity increase, and **$68 million** from **0.9%** occupancy increase[129](index=129&type=chunk) - Onboard and other revenue increased by **$252 million** from higher guest spending, **$103 million** from **2.8%** capacity increase, and **$29 million** from **0.9%** occupancy increase[128](index=128&type=chunk)[129](index=129&type=chunk) [Operating Expenses](index=29&type=section&id=Operating%20Expenses%20%28Six%20Months%29) Consolidated operating expenses increased by **$150 million (2.0%)** to **$7.7 billion**, driven by capacity, onboard costs, and maintenance, partially offset by ship sales and lower fuel prices | Expense Type | 6 Months Ended May 31, 2025 (Millions) | 6 Months Ended May 31, 2024 (Millions) | Change (Millions) | Change (%) | | :------------- | :------------------------------------- | :------------------------------------- | :---------------- | :--------- | | Cruise and tour operating expenses | $7,653 | $7,502 | $151 | 2.0% | | Selling and administrative | $1,663 | $1,603 | $60 | 3.7% | | Depreciation and amortization | $1,346 | $1,247 | $99 | 7.9% | | Total Operating Expenses | $10,662 | $10,352 | $310 | 3.0% | - Key increases in operating expenses included **$206 million** from capacity, **$63 million** from onboard costs, and **$50 million** from repair and maintenance[138](index=138&type=chunk) - These increases were partially offset by **$103 million** gains on ship sales, **$68 million** lower fuel prices, and **$58 million** lower fuel consumption per ALBD[138](index=138&type=chunk) [Operating Income](index=31&type=section&id=Operating%20Income%20%28Six%20Months%29) Consolidated operating income significantly increased by **$641 million** to **$1.5 billion**, reflecting strong revenue and expense trends across segments | Segment | 6 Months Ended May 31, 2025 (Millions) | 6 Months Ended May 31, 2024 (Millions) | Change (Millions) | | :------------ | :------------------------------------- | :------------------------------------- | :---------------- | | Consolidated | $1,477 | $836 | $641 | | North America | $1,207 | $797 | $410 | | Europe | $508 | $288 | $220 | [Nonoperating Income (Expense)](index=31&type=section&id=Nonoperating%20Income%20%28Expense%29%20%28Six%20Months%29) Interest expense, net of capitalized interest, decreased by **$203 million**; however, debt extinguishment and modification costs increased significantly | Metric | 6 Months Ended May 31, 2025 (Millions) | 6 Months Ended May 31, 2024 (Millions) | Change (Millions) | | :---------------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Interest expense, net of capitalized interest | $(718) | $(921) | $203 | | Debt extinguishment and modification costs | $(255) | $(66) | $(189) | [Liquidity, Financial Condition and Capital Resources](index=32&type=section&id=Liquidity%2C%20Financial%20Condition%20and%20Capital%20Resources) Discusses the company's liquidity, working capital, and strategies for managing cash and debt, highlighting new revolving credit and export credit facilities [Sources and Uses of Cash](index=32&type=section&id=Sources%20and%20Uses%20of%20Cash) Details cash sources and uses for operating, investing, and financing activities, noting decreased operating and investing cash flow, and substantial debt transactions | Activity | 6 Months Ended May 31, 2025 (Millions) | 6 Months Ended May 31, 2024 (Millions) | | :------- | :------------------------------------- | :------------------------------------- | | Net cash provided by (used in) operating activities | $3,317 | $3,807 | | Net cash used in investing activities | $(1,191) | $(3,384) | | Net cash used in financing activities | $(1,211) | $(1,183) | - Investing activities in 2025 were driven by **$1.5 billion** in capital expenditures and **$312 million** in proceeds from ship sales[154](index=154&type=chunk)[155](index=155&type=chunk) - Financing activities in 2025 included **$5.1 billion** in long-term debt repayments and **$4.1 billion** in long-term debt issuances[155](index=155&type=chunk) [Funding Sources](index=33&type=section&id=Funding%20Sources) Outlines the company's funding strategy, relying on liquidity and cash flows for capital expenditures, and managing credit risk - Liquidity: As of May 31, 2025, the company had **$5.2 billion** of liquidity, including **$2.1 billion** in cash and **$3.0 billion** available under the Revolving Facility[150](index=150&type=chunk) - Undrawn Export Credit Facilities: The company had **$8.4 billion** of undrawn export credit facilities to fund ship deliveries planned through 2033[150](index=150&type=chunk) | Year | Future Export Credit Facilities at May 31, 2025 (Billions) | | :--- | :------------------------------------------------------- | | 2025 | $0.8 | | 2026 | — | | 2027 | $1.3 | | 2028 | $1.3 | | 2029 | $1.7 | | Thereafter | $3.4 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Provides disclosures on market risk exposure, particularly interest rate risks, confirming no material changes since the previous Form 10-K filing [Interest Rate Risks](index=33&type=section&id=Interest%20Rate%20Risks) Provides debt composition by interest rate type after swaps, indicating no material changes to market risk exposure since the 2024 Form 10-K | Debt Type | May 31, 2025 (%) | | :---------- | :--------------- | | Fixed rate | 58 % | | EUR fixed rate | 24 % | | Floating rate | 7 % | | EUR floating rate | 11 % | - No Material Changes: There have been **no material changes** to the company's exposure to market risks since its 2024 Form 10-K filing[158](index=158&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Addresses the effectiveness of disclosure controls and procedures and reports on changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=33&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) States that disclosure controls and procedures were evaluated and concluded to be effective as of May 31, 2025 - Effectiveness: The company's disclosure controls and procedures were evaluated and concluded to be **effective** as of May 31, 2025[161](index=161&type=chunk) [Changes in Internal Control over Financial Reporting](index=33&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Reports no material changes in the company's internal control over financial reporting during the quarter ended May 31, 2025 - No Material Changes: There have been **no material changes** in internal control over financial reporting during the quarter ended May 31, 2025[162](index=162&type=chunk) [PART II - OTHER INFORMATION](index=35&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) Incorporates legal proceedings disclosures from Note 4, including regulatory inquiries and SEC environmental disclosure requirements for sanctions exceeding **$1 million** - Reference to Note 4: Legal proceedings, including regulatory inquiries, are described in Note 4 – "Contingencies and Commitments" of the consolidated financial statements[165](index=165&type=chunk) - Environmental Disclosure: SEC rules require disclosure of environmental matters with potential monetary sanctions exceeding **$1 million**[165](index=165&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) Refers to the Form 10-K for a comprehensive discussion of risk factors, confirming no material changes since the filing - Reference to Form 10-K: Risk factors affecting business and financial results are discussed in "Item 1A. Risk Factors" in the Form 10-K[166](index=166&type=chunk) - No Material Changes: There have been **no material changes** to these risk factors since the Form 10-K filing[166](index=166&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205.%20Other%20Information) Reports no director or Section 16 officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - Trading Plans: No director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended May 31, 2025[167](index=167&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) Provides an index of exhibits filed with Form 10-Q, including articles, material contracts, various certifications, and the Interactive Data File - Exhibits List: Includes Articles of Incorporation, By-Laws, Indenture for **5.875%** Senior Unsecured Notes due 2031, stock award agreements, and various executive officer certifications[169](index=169&type=chunk) - Interactive Data File: Consolidated financial statements for the quarter ended May 31, 2025, are filed in Inline XBRL format as Exhibit 101[169](index=169&type=chunk)[170](index=170&type=chunk) [SIGNATURES](index=38&type=section&id=SIGNATURES) [Signatures](index=38&type=section&id=Signatures) Contains signatures of authorized representatives, including the Chief Executive Officer and Chief Financial Officer, certifying the report filing - Signatories: The report is duly signed by Josh Weinstein (Chief Executive Officer) and David Bernstein (Chief Financial Officer and Chief Accounting Officer) for both Carnival Corporation and Carnival plc[173](index=173&type=chunk)[174](index=174&type=chunk)

Core Viewpoint - Carnival Corp reported strong fiscal second-quarter results, exceeding expectations, but shares traded lower amid a challenging market environment [1][2]. Group 1: Analyst Ratings and Price Targets - Goldman Sachs analyst Lizzie Dove maintained a Buy rating and raised the price target from $31 to $33, citing significantly better-than-expected results and conservative guidance [2]. - Stifel analyst Steven M. Wieczynski reaffirmed a Buy rating and increased the price target from $33 to $34, noting gross and net revenues of $6.3 billion and $4.9 billion, respectively, which surpassed consensus estimates [4]. Group 2: Financial Performance and Guidance - Carnival's management raised full-year guidance for adjusted earnings from $1.83 per share to $1.97 per share and for adjusted EBITDA from $6.7 billion to $6.9 billion [4]. - The company indicated that 2026 bookings are approaching record levels, which may alleviate investor concerns regarding cruise demand [5]. Group 3: Market Context and Strategic Positioning - Despite a murky macro and geopolitical environment, Carnival's local European exposure and focus on drive-to/shorter itineraries from the U.S. provide a buffer against potential headwinds [3]. - Analysts highlighted the significant free cash flow generation currently being produced, which will assist in deleveraging Carnival's balance sheet [5].