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Cruise line operator Carnival (CCL) experienced another wave of demand in Q3, enabling it to exceed EPS and revenue estimates while delivering record results across a variety of metrics, but the stock is still drifting lower as investors lock in prior gains. Along with rivals Norwegian Cruise Line (NCLH) and Royal Caribbean (RCL), the company has been benefitting from robust and resilient demand for cruises, creating lofty expectations that drove shares higher by 25% since mid-August.

Coming off an impressive beat-and-raise performance in Q2 in which CCL touted broad-based strength in both its European and North American brands, the company upped the ante in Q3, achieving new quarterly records for operating income ($2.2 bln, +34% yr/yr), adjusted EBITDA ($2.8 bln, +25% yr/yr), and revenue ($7.9 bln, +15.2%). The problem, though, is that the market was already anticipating the strong Q3 results, putting the spotlight on CCL's guidance.

• While the company did increase its FY24 EPS guidance to $1.33 from its previous forecast of $1.18, partly to reflect its outperformance in Q3, its Q4 EPS guidance of $0.05 slightly missed the mark. Additionally, its Q4 Net Yield guidance of approximately 5.0% represents a drop-off from the +8.7% CCL registered this quarter. 
  • Net Yield is a key demand metric in the cruise line industry that strips out direct costs such as air transportation and travel agent commissions from the revenue line. 
• At the same time, CCL is anticipating expenses to increase materially in Q4, forecasting adjusted cruise costs (excluding fuel per available lower berth day) of +8.0% yr/yr (constant currency), up from +3.5% in Q3.

In the big picture, these are relatively minor issues that do little to negatively alter the bullish narrative for CCL. 

• On that note, the momentum behind CCL's business is showing no signs of slowing as nearly half of 2025 is already booked and with remaining inventory running at lower levels compared to a year earlier. This combination of healthy demand and leaner inventory is fueling record ticket pricing.
• Additionally, the 2026 season is off to a remarkable start with CCL generating record booking volumes over the last three months.

Overall, there was plenty to like with CCL's Q3 earnings report, which showed that consumers are still willing to spend on experiences like cruises. However, with the stock sailing sharply higher over the past several weeks, CCL's Q4 guidance provided enough of a reason for investors to take some gains off the table.