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]

Key Takeaways In its Q3 report, Carnival surprised on earnings for the 12th consecutive quarter.Carnival raised FY2025 guidance and analysts raised earnings estimates. Carnival shares are cheap with a forward price-to-earnings ratio of just 13.7. Carnival Corp. & plc (CCL) recently posted another record quarter. People are still cruising. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by 47.9% this year.Carnival is the largest global cruise company. It’s brands include Carnival Cruise Line, AI ...

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]

Core Insights - Carnival has experienced significant growth, with shares increasing by 291% over the past three years as of October 6, driven by a resurgence in travel demand post-COVID-19 pandemic [1][3] Financial Performance - In the fiscal 2025 third quarter, Carnival's revenue rose by 3% year over year to $8.2 billion, marking the tenth consecutive quarter of record revenues [3] - The company achieved a record in customer deposits, collecting $7.1 billion in Q3 [3] - Carnival reported record net yields and operating income, indicating strong financial health [3] Market Demand and Growth Potential - There is a robust demand for cruise travel, which is a positive indicator for investors [3] - The cruise industry is attracting younger customers and first-time travelers, suggesting an expanding market opportunity that can sustain long-term demand [5] - Carnival's leadership believes the company offers a compelling value proposition compared to land-based travel options, which could enhance its competitive advantage [4]

Core Viewpoint - Carnival Corporation has demonstrated strong financial performance, achieving record revenues and profits, indicating robust demand for cruises despite concerns over high debt levels and economic uncertainty [2][3][5]. Financial Performance - Carnival reported third-quarter revenue of $8.2 billion, a 3% year-over-year increase, marking the 10th consecutive quarter of record revenue [2]. - The company achieved an all-time high profit of $1.9 billion during the same period [2]. - Carnival has over $25 billion in long-term debt but has refinanced over $11 billion of it this year, benefiting from lower interest rates [3]. Stock Valuation - The stock is currently trading at levels not seen since 2021, yet it remains significantly below pre-pandemic highs, which were often above $50 [4]. - The price-to-earnings ratio stands at 15, dropping to 12 based on forward earnings projections, suggesting the stock is modestly priced relative to profitability [5]. Demand Outlook - Nearly half of Carnival's 2026 bookings are already secured, reflecting strong ongoing demand for cruises [6]. - Cruises are perceived as budget-friendly travel options, which may sustain demand even amid economic challenges [6]. Investment Perspective - Despite the high debt load, Carnival's consistent profitability and record performance suggest a positive trajectory for the company [7]. - The stock is viewed as less risky than in previous years, with attractive pricing potentially supporting continued demand [8]. - The combination of low valuation and improved financial performance makes Carnival a compelling investment opportunity [8].

Carnival (CCL) appears an attractive pick, as it has been recently upgraded to a Zacks Rank #1 (Strong Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.A company's changing earnings picture is at the core of the Zacks rating. The system tracks the Zacks Consensus Estimate -- the consensus measure of EPS estimates from the sell-side analysts covering the stock -- for the current and following years.Since a changing ea ...