Carnival's Free Cash Flow Rises Y/Y - CCL Stock Could Still Be over 23% Undervalued

Core Insights - Carnival Corp (CCL) reported strong free cash flow for Q3 ending August 31, indicating increasing consumer interest in cruises, with potential undervaluation of CCL stock by over 23% [1][2] - Current trading price of CCL stock is $29.14, down from a peak of $31.45 on September 18 and $32.49 on August 28 [1] Financial Performance - Revenue increased by 3.25% year-over-year (Y/Y) to $8.153 billion, while cash flow from operations rose by 14.77% Y/Y to $1.383 billion [4] - For the first nine months of the fiscal year, revenue was up 6.34% Y/Y, but capital expenditures (capex) increased by 12.1% in Q2, leading to a lower free cash flow (FCF) margin of 9% compared to an operating cash flow (OCF) margin of 17% [4][5] - The FCF margin for the first nine months was 12.8%, which is an improvement from last year's 7.3% [5] Management Guidance - Management has raised revenue and yield guidance for the third time, which could enhance operating cash flow and OCF margins [6] - Future FCF margins may improve depending on capex spending in fiscal Q4, ending November 30 [6] Capital Expenditures - Management indicated that there is $1.7 billion in remaining capex, reduced from the previous guidance of $2.3 billion, with $648 million in capex booked during fiscal Q3, lower than the $850 million in Q2 [7]