Caribbean Capacity Surges, Can Carnival Defend Yields in 2026?

Core Insights - The Caribbean cruise market is experiencing a significant supply shock, with industry-wide capacity expected to increase sharply by 14% in 2026, leading to a two-year increase of approximately 27% [1][2] - Carnival Corporation & plc (CCL) aims to maintain pricing and yield despite the rising capacity, forecasting a normalized yield growth of around 3% in 2026 [2][5] Company Strategy - Carnival emphasizes revenue optimization over simply filling berths, willing to sacrifice marginal occupancy to preserve price integrity, a shift from the industry's historical discounting practices [3] - The company benefits from strong booking visibility, with about two-thirds of 2026 capacity already sold at historically high prices, and customer deposits ending 2025 at a record level [2][11] Competitive Landscape - Royal Caribbean Cruises Ltd. (RCL) is also facing the Caribbean capacity surge, supported by new ships and an expanding private-destination portfolio, but its higher capacity growth may pressure pricing discipline if demand softens [6][7] - Norwegian Cruise Line Holdings Ltd. (NCLH) has a smaller fleet and relies more on contemporary and premium brands, making it more vulnerable to promotional activity in a crowded market [8] Financial Performance - CCL's shares have increased by 18.7% over the past three months, outperforming the industry's rise of 12.8% [9] - CCL trades at a forward price-to-earnings ratio of 12.34X, below the industry average of 17.64X, indicating potential valuation upside [12] - The Zacks Consensus Estimate for CCL's 2026 sales and earnings suggests a year-over-year increase of 4.6% and 12.9%, respectively [14]