Carnival's Debt Refinancing Gains Steam: Investment Grade Ahead?

Core Insights - Carnival Corporation & plc (CCL) is enhancing investor confidence through operational momentum and significant balance sheet improvements [1][4] - The company has made substantial progress in refinancing its debt, which is expected to lower net interest expenses and simplify its capital structure [2][4] Financial Performance - In Q2 of fiscal 2025, Carnival prepaid $350 million of its $1.4 billion notes due in 2026 and refinanced the remaining amount with senior unsecured notes maturing in 2031, projected to reduce net interest expense by over $20 million through early 2026 [1][2] - Total debt as of May 31, 2025, was $27.3 billion, a slight decrease from $27.48 billion reported on Nov. 30, 2024 [2] - The net debt-to-EBITDA ratio improved to 3.7x in Q2, down from 4.1x in Q1, indicating effective deleveraging [3][7] Market Position - CCL shares have surged 62.1% over the past three months, outperforming the industry growth of 36.2% [5] - The stock is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 13.53X, below the industry average of 19.88X, suggesting it is undervalued compared to peers [8] Earnings Outlook - The Zacks Consensus Estimate for Carnival's fiscal 2025 earnings per share has been revised upward from $1.87 to $1.98, reflecting strong analyst confidence [10] - Projections indicate a 39.4% rise in fiscal 2025 earnings for Carnival, compared to expected increases of 30.9%, 11.5%, and 16.5% for competitors Royal Caribbean, Norwegian Cruise, and OneSpaWorld, respectively [11]