Carnival (US:CCL) ZACKSยท2025-10-09 12:55Core 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]