Carnival Stock Slips Despite Another Record Quarter and Raised Guidance. Should Investors Buy the Dip?

Core Insights - Carnival Corp. has reported its 10th consecutive quarter of record revenue, indicating a strong recovery in the cruise industry post-pandemic [1][3] - Despite strong financial results, the stock price declined following the report, although it remains up approximately 15% year-to-date [1] Financial Performance - For the fiscal third quarter, Carnival's revenue increased by 3% to a record $8.15 billion, with ticket revenue rising by 4% to $5.43 billion and onboard revenue increasing by 2% [3] - Adjusted net income rose by 10% to $2 billion, while adjusted EBITDA increased by 7% to $3 billion, and adjusted earnings per share climbed 13% to $1.43 [6] - The company generated about $4.7 billion in operating cash flow and $2.6 billion in free cash flow, marking a significant improvement from the previous year [7] Capacity and Occupancy - Available lower berth days (ALBDs) decreased by 2% to 24.6 million, while occupancy remained high at 112% [4] - Net yields increased by 5% to $249.11, indicating improved profitability per cabin [5] Future Outlook - Carnival expects fiscal Q4 adjusted net income to surge by 60% to $300 million and net yields to rise by 6.4% [8] - The company has raised its full-year guidance for net yield growth, adjusted EBITDA, and adjusted EPS across multiple quarters [10] Debt Management - Carnival is projected to reduce its leverage to 3.6 times net debt/adjusted EBITDA by year-end 2025, down from 6.7 times at the end of fiscal 2023 [8][12] - The company is taking a disciplined approach to adding new ships while benefiting from strong occupancy and high prices [13] Valuation - Carnival trades at a forward enterprise value (EV)-to-EBITDA multiple of approximately 9.5, which is in line with competitors and offers a reasonable valuation [14]