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Carnival (CCL +7%) enjoys smooth sailing today after registering a healthy beat-and-raise in Q2 (May) on record numbers, underscoring the compounding effect of mounting demand across its cruise brands. CCL's impressive quarterly report is not just lifting the cruise line industry, as rivals Norwegian Cruise Line Holdings (NCLH) and Royal Caribbean (RCL) spring higher, but also the general travel industry, with Expedia Group (EXPE), Airbnb (ABNB), and Booking Holdings (BKNG) all experiencing positive price action today.

The uplifting effect across the broader travel market is not without good reason. CCL's Q2 report showcased a sustained demand to spend money on experiences over things. CCL does not expect the current demand levels to dwindle anytime soon either, reiterating that the demand it is seeing is not pent-up demand. Instead, it reflects the strength of the consumer, as CCL benefits from growth in repeat guests and new guests, both of which climbed by 10% yr/yr in Q2.

• Supported by this sustained growth, CCL delivered revs, earnings, and booking levels above its guidance in Q3. Sales rose by 17.7% yr/yr to $5.78 bln, supporting a return to positive EPS at $0.11 following two straight quarters of net losses and $(0.31) in the year-ago period. Meanwhile, booking volumes continued to expand, leading to record levels for 2025 sailings. CCL added that while it is still early, the cumulative advanced booked position for 2025 is higher than that for 2024 across price and occupancy.
  • Strength was broad-based, with significant yield improvement across CCL's European and North American brands, up 20% and 7%, respectively.
  • Also, CCL's adjusted EBITDA surpassed the number delivered during 2Q19, marking its highest in over 15 years.
• CCL mentioned that limited inventory remains for sale for the rest of 2024, putting it in a prime position to raise ticket prices. Management also stated that over the near term, pricing on bookings taken during Q2 has continued to run higher for Q3 (Aug) and Q4 (Nov). As a result, CCL was confident in raising its FY24 (Nov) EPS outlook to $1.18 from $0.98 and issuing a 75 bp bump in FY24 net yields to 10.25%.

Since taking the reins nearly two years ago, CEO Martin Schneider has steered CCL through a choppy landscape. Mr. Schneider implemented actions to improve the company's commercial operations and strengthen its global network of ships while aggressively managing down debt and interest expenses. These actions have helped put CCL on track toward investment grade metrics, no small feat given how disruptive the pandemic was to the company's financials. It is also impressive, given how the economic landscape is far from picturesque. While consumers are not losing their ability to spend, they are more conscientious about where they allocate their budgets, producing some headwinds in consumer demand. However, by still opting to travel, a firmer base of consumers across the cruise line industry is forming, helping keep the wind in CCL's sails over the long run.