Carnival (CCL) delivered another record-setting quarter, with strong profits and improved guidance. Yet, shares fell after the release, showing a classic case of “sell the news.”
Key Points
-
Carnival reported record revenue of $8.2 billion and adjusted EPS of $1.43, topping Wall Street’s forecasts.
-
Management raised full-year 2025 earnings guidance for the third time this year, now projecting nearly 55% growth.
-
Despite strong fundamentals, Carnival stock dropped more than 4% as investors locked in profits after a strong run-up.
Why did Carnival stock fall after strong earnings?
Carnival beat analyst expectations on both revenue and earnings, posting its tenth consecutive quarter of record sales. Adjusted earnings came in at $1.43 per share, versus forecasts of $1.32, while revenue reached $8.2 billion, above the $8.1 billion consensus.
Yet, the stock dropped over 4% on the day of the announcement. This decline was not about weak fundamentals — instead, it looked like a “sell-the-news” reaction. Shares had already climbed 23% this year heading into the earnings release, leaving some investors eager to take profits.
How strong is Carnival’s booking demand?
Carnival’s booking trends have been a standout. Since May, booking volumes have been higher than last year and well ahead of capacity growth. Prices remain at historical highs, signaling that demand is not just recovering but expanding.
-
2025 is nearly fully booked at record levels.
-
2026 is already showing cumulative bookings in line with 2025’s highs.
-
Even 2027 bookings are off to a record start.
This demand strength helped push customer deposits to a record $7.1 billion.
What does Carnival’s guidance say about the future?
Carnival raised its full-year 2025 outlook for the third time this year. Management now expects:
-
Adjusted EPS of $2.14 (up from $1.97 previously).
-
55% year-over-year earnings growth, or $235 million more than prior guidance.
-
Q4 earnings of $0.23 per share, ahead of Wall Street’s expectations.
The company also highlighted an adjusted return on invested capital of 13% — the highest in nearly two decades.
What it means for investors
Carnival’s fundamentals remain strong. Demand is resilient, pricing power is intact, and profitability is improving. The post-earnings selloff looks more like short-term profit-taking than a sign of weakness.
However, investors should note that while CCL is up nearly 23% this year, it has underperformed rival Royal Caribbean (+42%). That gap suggests Carnival still has room to catch up if momentum continues.
Conclusion
Carnival just delivered its strongest quarter ever, raising guidance and showing robust demand well into 2026. While the stock sold off on the news, the underlying story remains bullish. For long-term investors, this may be less about short-term volatility and more about riding the wave of resilient travel demand.
FAQs
Why did Carnival stock drop after beating earnings?
Shares fell because of a “sell-the-news” reaction. The stock had already risen 23% this year, so some investors took profits despite strong fundamentals.
Is Carnival stock a buy right now?
Analysts maintain a Moderate Buy consensus, with an average price target of $35.21 — about 19% above current levels. Carnival’s raised guidance and strong bookings suggest room for upside, though volatility is likely.
How does Carnival compare to Royal Caribbean and Norwegian?
Year-to-date, Carnival is up 23%, behind Royal Caribbean’s 42% gain but ahead of Norwegian’s 3% drop. Carnival’s growth outlook and demand strength put it in a solid competitive position.
What are “net yields” in cruising?
Net yields measure the average revenue per passenger after discounts. Carnival reported a 4.6% increase in net yields, all on a same-ship basis, showing stronger onboard spending and pricing power.
Is cruise demand still strong for the future?
Yes. 2025 and 2026 are already at record booking levels, with prices historically high. Even 2027 is pacing at record early demand, signaling long-term resilience in the cruise market.