Carnival plc (CCL) Ordinary USD1.66
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(1.23%)
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HL comment (27 March 2026)
No recommendation - No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.
Carnival’s first-quarter revenue increased by 6% to $6.2bn, boosted by strength in late bookings.
Underlying cash profit (EBITDA) grew by 5% to $1.3bn, slightly ahead of guidance, despite a $54mn hit from fuel prices.
Improved cash generation drove free cash flow up by $0.4bn to $0.7bn. Net debt was $23.9bn.
Full-year guidance for underlying cash profit had been reduced from around $7.6bn to $7.2bn, assuming oil prices fall over the rest of the year
Carnival expects to pay over $0.8bn in dividends this year and today announced a $2.5bn buyback program.
The shares were down 2.7% following the announcement.
Our view
Carnival had a strong first quarter, and with 85% of this year’s sailings already booked, revenue visibility is better than it was in early 2025. The recent spike in fuel prices following the outbreak of the Iran War means we weren’t surprised by the modest downgrade to this year’s profit guidance.
Outside of fuel, cost management continues to impress. However, the updated guidance assumes oil prices will fall by around 23% by the time peak season arrives, and with uncertainty riding high, a share buyback wasn’t enough to steady nerves on the day.
We’re still encouraged by the resilience in demand for Carnival’s cruises. Further out, the fleet is expected to grow again, but no new ships are due to launch until 2027. The company has set out some ambitious medium-term performance targets driven by initiatives including upgrades to the existing fleet and a wider range of routes and itineraries.
Remember, cruising can be a fickle business, and there’s no guarantee that demand will align with planned capacity growth. Geopolitical unrest and economic uncertainty are the key risks to Carnival's target of growing earnings per share by 50% between 2025 and 2029.
The tension in the Middle East hasn’t just driven up fuel costs. It’s also weighing on the outlook for the broader economy. A prolonged dip in consumer spending power means that island hopping in the Caribbean could move down the pecking order when it comes to spending priorities.
As it stands, however, management is confident enough to keep the recently reintroduced dividends on the table, with share buybacks entering the mix too. In total, $14bn worth of shareholder returns are targeted by 2029.
That’s underpinned by improving cash generation, while continued focus on strengthening the balance sheet suggests an element of prudence. However, with economic uncertainty as high as it is, it’s worth remembering that no shareholder returns are guaranteed.
Carnival is a market leader in an industry with a long-term track record of growth, and it’s now putting together the building blocks of further success. If it can meet its targets, we think there’s attractive upside on offer. However, sentiment towards the sector is highly sensitive to geopolitical events and today’s uncertainty around oil prices and the economy adds more risk than usual.
Environmental, social and governance (ESG) risk
Consumer services companies are medium-risk in terms of ESG, and very few companies are excelling at managing them. That leaves plenty of opportunity for forward-thinking firms. The primary risk-driver is product governance. The impact of their products on society, labour relations and environmental concerns are also key risks to monitor.
According to Sustainalytics, the company's overall management of material ESG issues is strong, with a robust governance structure and reporting framework in place. However, Carnival still faces significant exposure to risks linked to emissions, effluents and waste as well as quality and safety issues. Carnival has implemented carbon reduction programmes but shipping is likely to be one of the last forms of transport to be decarbonised.
Carnival key facts
Forward price/sales ratio (next 12 months): 1.11
Ten year average forward price/sales ratio: 1.26
Prospective dividend yield (next 12 months): 2.4%
Ten year average prospective dividend yield: 1.8%
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.
Previous Carnival plc updates
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