Group 1 - Carnival Corporation & plc (NYSE:CCL) is identified as one of the best cheap stocks to buy for 2026, with TD Cowen raising its price target from $35 to $38 while maintaining a Buy rating [1] - Despite near-term challenges in the cruise market, fundamental demand for cruises remains strong, and capacity trends are expected to be constructive through fiscal year 2029 [3] - Carnival reported record annual operating income of $4.5 billion for the fiscal year ended November 30, 2025, which is approximately 25% higher than FY2024 [4] Group 2 - The company achieved full-year revenues of $26.6 billion, net income of $2.8 billion, and adjusted net income of about $3.1 billion, all of which are new highs [5] - Adjusted EBITDA reached $7.2 billion, exceeding 2024 levels by more than $1 billion, prompting the board to reinstate a quarterly dividend of $0.15 per share [5] - Management raised its earnings outlook, projecting adjusted net income of approximately $3.5 billion for the coming year, with return on invested capital expected to exceed 13.5% [5]

Core Insights - Carnival Corporation & plc (CCL) is trading at a discount compared to its industry, with a forward 12-month price-to-earnings (P/E) ratio of 11.90X, below the five-year average and the industry average of 18.11X [2][3][8] - The company has experienced a decline in share price of 5.4% year-to-date, while peers like Royal Caribbean have gained 15.2% [4] Valuation and Performance - CCL's forward P/E ratio of 11.90X indicates a discounted valuation compared to industry peers such as Royal Caribbean (16.18X), Norwegian Cruise Line (8.44X), and OneSpaWorld (18.89X) [3][8] - The Zacks Leisure and Recreation Services industry has lost 1.8% year-to-date, while the Consumer Discretionary sector has gained 5.8% [4] Growth Drivers - Carnival is capitalizing on strong demand with record advance bookings and higher pricing power, projecting a 32% increase in EPS for 2025 [8][10] - The company focuses on exclusive cruise destinations, enhancing guest experiences and pricing power through proprietary locations like Half Moon Cay [11] - Fleet modernization efforts are improving energy efficiency and expanding revenue opportunities, lowering costs and enhancing returns on invested capital [12] - Land-based operations in Alaska complement cruise offerings, allowing for unique vacation packages and maintaining strategic control over growth [13] Earnings Estimates and Analyst Outlook - The Zacks Consensus Estimate for Carnival's fiscal 2025 EPS has been revised upward from $1.85 to $1.87, reflecting strong analyst confidence [14] - Analysts forecast a 31.7% jump in fiscal 2025 earnings for Carnival, compared to growth rates of 30.7% for Royal Caribbean and 12.1% for Norwegian Cruise [17] - The average price target for Carnival stock is $28.21, indicating a potential upside of 19.7% from the last closing price of $23.57 [18] Broker Sentiment - Carnival holds an average brokerage recommendation of 1.58, indicating a favorable outlook with 18 Strong Buy recommendations from 26 firms [19] - The positive analyst support and a wide range of price targets highlight optimism regarding Carnival's recovery and long-term potential [20] Investment Consideration - Carnival's current valuation presents an attractive opportunity for investors, supported by strong booking momentum and strategic investments [21] - Given the bullish broker sentiment and consensus price targets, investors may consider initiating or adding to positions at current levels [22]