Carnival Corporation (LON:CCL) reported its fourth-quarter 2024 earnings, significantly surpassing analysts’ expectations with an earnings per share (EPS) of $0.14 compared to the forecasted $0.07. The company also exceeded revenue forecasts, reporting $5.94 billion against an anticipated $5.91 billion. Following the announcement, Carnival (NYSE:CCL)’s stock rose by 4.41% in pre-market trading, reflecting investor optimism.
Key Takeaways
- Carnival Corporation’s EPS more than doubled the forecast.
- Record revenue and yield improvements were reported for 2024.
- Stock price increased by 4.41% following the earnings announcement.
- Strong demand and advanced bookings for 2025 and 2026.
- Significant debt reduction and greenhouse gas emissions achievements.
Company Performance
Carnival Corporation closed 2024 with record financial results, achieving an all-time high in annual revenues of $25 billion. The company reported a net income that exceeded guidance by $126 million, highlighting its strong operational performance. The cruise line also saw an 11% yield improvement, indicating robust demand and pricing power in the market.
Financial Highlights
- Revenue: $5.94 billion in Q4 2024, slightly above forecasts.
- Earnings per share: $0.14, versus a forecast of $0.07.
- Cash from operations: Nearly $6 billion for the full year.
- Debt reduction: Over $8 billion paid down from peak levels.
Earnings vs. Forecast
Carnival Corporation’s EPS of $0.14 was a significant beat over the forecasted $0.07, representing a 100% surprise. This performance marks a notable improvement from previous quarters, showcasing the company’s ability to surpass market expectations consistently.
Market Reaction
Following the earnings release, Carnival’s stock price increased by 4.41% to $26.29. This places the stock near its 52-week high of $27.17, indicating strong investor confidence. The positive market reaction aligns with the broader trend of recovery in the travel and leisure sector.
Company Outlook
Looking ahead, Carnival Corporation projects a 4.2% yield growth for 2025 and expects net income to exceed $2.3 billion. The company plans to launch a new Bahamian destination, Celebration Key, in July 2025, and continues to focus on enhancing operational efficiency and reducing emissions.
Executive Commentary
CEO Josh Weinstein stated, "We delivered a stellar quarter to close out a phenomenal year," emphasizing the company’s strong performance. CFO David Bernstein added, "We are constantly working hard. We have lots of ideas out there," highlighting ongoing innovation and strategic planning.
Q&A
During the earnings call, analysts inquired about the potential impact of a new Mexican port tax, which Carnival expects to be minimal. Other questions focused on the company’s destination strategy and the resilience of its booking curve and pricing.
Risks and Challenges
- Potential geopolitical disruptions, such as the Red Sea situation, could impact future financials.
- Fluctuating fuel costs may affect operational expenses.
- Macroeconomic pressures, including inflation, could influence consumer spending on travel.
- Competitive pressures in the cruise industry continue to challenge market share.
- Environmental regulations may require additional investments in sustainability initiatives.
Full transcript - Carnival Corp (CCL) Q4 2024:
Conference Operator: Greetings, and welcome to the Carnival Corporation and Plc Fourth Quarter 20 24 Earnings Conference Call. As a reminder, this conference is being recorded. It’s now my pleasure to turn the call over to Beth Roberts, Senior Vice President, Investor Relations. Please go ahead, Beth.
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation: Thank you. Good morning, and welcome to our Q4 2024 earnings conference call. I’m joined today by our CEO, Josh Weinstein our Chief Financial Officer, David Bernstein and our Chair, Mickey Arison. Before we begin, please note that some of our remarks on this call will be forward looking. Therefore, I will refer you to the forward looking statement in today’s press release.
All references to ticket prices, net per diems, net yields and adjusted cruise costs without fuel will be in constant currency unless otherwise stated. References to per diems and yields will be on a net basis. Our comments may also reference cruise costs without fuel, EBITDA, net income, free cash flow and ROIC, all of which will be on an adjusted basis unless otherwise stated. All these references are non GAAP financial measures defined in our earnings press release. A reconciliation to the most directly comparable U.
S. GAAP financial measures and other associated disclosures are also contained in our earnings press release and in our investor presentation. Please visit our corporate website where our earnings press release and investor presentation can be found. With that, I’d like to turn the call over to Josh.
Josh Weinstein, CEO, Carnival Corporation: Thanks, Beth. We had a strong finish to an incredibly strong year. And right off the bat, I’d like to thank the efforts of our hard working and dedicated team, the best in all of Travel and Leisure. They have delivered results that consistently outperformed even my own high expectations. Our global portfolio is clearly firing on all cylinders and I am very proud of what we’ve been able to accomplish together.
We delivered another stellar quarter to close out a phenomenal year. In fact, this was our 7th consecutive quarter achieving record revenues alongside favorable forward indicators like record booking trends and record customer deposits indicating a continuation of the strong momentum we’ve been experiencing for the last 2 years. 4th quarter net income improved by over $250,000,000 year over year coming in over $125,000,000 better than expected. The outperformance was up and down the P and L and driven by strong closing demand across the portfolio which pushed yields, per diems, EBITDA and operating income all to new highs this year. Full year revenues hit an all time high of $25,000,000,000 and produced all time high cash from operations of almost $6,000,000,000 Robust demand delivered a full year 2024 yield increase of 11% with the majority of the increase attributable to higher prices.
Yields finished the year nearly 2 50 basis points better than our original guidance driven by a strong demand environment that we elevated throughout the year. Encouragingly, this was broad based. For 2024, prices were up in all of our major brands and trades between mid single digit to mid teen percentages. And on top of this, onboard spending levels actually accelerated sequentially each quarter throughout the year. Additionally, unit costs came in 100 basis points better than our original guidance for the year as we identified and executed upon additional cost savings initiatives and saw the benefit of an easing inflationary environment.
All of this translated to an additional $700,000,000 pickup to the bottom line compared to our December guidance and step change improvements in our 2 financial metrics that form part of our 2026 sea change targets, EBITDA per ALBD and ROIC. After just 1 year down with 2 to go, we’re already over 80% of the way toward achieving both of these targets, calling for a 50% increase in EBITDA per ALBD from our 2023 starting point and ROIC of 12%, both of which would be the highest the company has seen in almost 20 years. And with ROIC ending 2024 at 11%, comfortably above our cost of capital, we are already delivering long term value for our shareholders as we lay the foundation we’ll build upon in 2025 and beyond. At the outset and with about 2 thirds of the year already on the books, 2025 is shaping up to be another banner year with yield growth exceeding 4%, far outpacing historical growth rates and again exceeding unit cost growth, delivering more than $400,000,000 incrementally to the bottom line. In fact, booking trends even accelerated during the quarter.
Despite less inventory for sale as compared to same time last year, 2025 booking volumes over the quarter were actually higher year on year at higher prices for each quarter, including the period leading up to the election. Booking (NASDAQ:BKNG) volumes for 2026 also continue to break records, reflecting sustained demand even for further out sailings. The ongoing strength in demand reinforced our record breaking booked position. Both price and occupancy are higher for each of the 4 quarters of 2025 and we managed to increase both our price and occupancy advantage for our 2025 book position, thanks to our outstanding efforts this past quarter. I can actually now report that our North American and European segments are each at their longest advanced booking windows on record.
All core deployments are also better booked at higher prices than the record levels we achieved at the same time last year. So with a good amount less inventory to sell for 2025, I cannot stress enough to our customers and trade partners that if you want to sail with us this year, book now while there’s still space available. And keep in mind, our 2024 results and booked position for future sailings are being driven by improved operational execution across our brands and are essentially on a same ship basis. Now don’t get me wrong, new ships are great. In fact, we welcome 3 amazing new ships in 2024.
Carnival Jubilee, the 3rd of 5 XL Class vessels for Carnival Cruise Line is proudly sailing out of the great state of Texas. Sun Princess, Princess Cruises’ next generation flagship was just awarded Conde Nast Travelers (NYSE:TRV) 2024 Mega Ship of the Year, beating out all other mega ships that entered service this year. And last but not least came the spectacular Queen Anne, Cunard’s 1st ship in 14 years and a beautiful addition to Queen Victoria, Queen Elizabeth and the venerable Queen Mary 2. While new ships do command a nice premium, the vast majority of our yield growth was driven by fundamental demand improvements for the existing ships across our portfolio of world class brands. Even excluding our new builds, 2024’s yields were still up almost 10% over 2023.
That’s because we’re achieving demand growth well above our modest supply pipeline through ground up efforts to improve execution across the commercial space. We’ve been investing in both talent and tools, honing in on each of our brands’ unique target markets, crafting marketing campaigns that speak directly to them and in the most effective forums. We’re successfully enticing new cruise guests away from land based alternatives. In fact, both new to cruise and repeat guests were each up double digit percentages this past year. At the same time, our marketing efforts are continuing to deliver growth in web visits, natural and paid search that far outpace our limited capacity growth, keeping the pipeline of new demand full.
Simultaneously with augmenting our performance from top of funnel consideration to closing the deal and generating the bookings, we’ve been sharpening our yield management techniques to optimize our booking curves and drive ticket prices and onboard spending higher. While all of these efforts are already in flight and clearly working, we have even more in store to continue the momentum. We’re launching new marketing campaigns across all our brands. Princess, Cunard and Seaborn have already debuted spectacular new creatives this month. In Princess’ case, it’s fresh take on its incomparable Love Boat theme featuring Hannah Waddingham of Ted Lasso fame already helped to produce record booking volumes for the Black Friday through Cyber Monday period.
And stay tuned for new campaigns from AIDA, Carnival, Costa, Holland America and P and O Cruises in the U. K, all launching shortly to coincide with wave season, our peak booking period. We’re aggressively working to increase awareness and consideration for cruise travel globally. We’re also actively working on an enhanced destination strategy to provide guests with yet another reason to take a cruise vacation with us and that is sure to help us continue to excel. While we retain by far the largest footprint in the Caribbean with 6 owned and operated destinations that captured 6,500,000 guest visits in 2024, we believe we had a meaningful opportunity to expand and capitalize on this strategic advantage.
These destinations are amongst our highest rated guest experiences today and we have plans to lean into these assets even further. While historically, the marketing of our own assets have really focused on the ships, we have untapped potential to create demand for these amazing destination experiences. I have never been more excited about these prospects as we begin to unfold this multiyear strategy with the opening of Celebration Key in just about 6 months. This will be by far our largest and most carnival centric destination in our portfolio with 5 awesome portals built for fun from family friendly to exclusive beach club experiences. Not only will Celebration Key be the closest destination in our portfolio, saving fuel costs and reducing greenhouse gas emissions, the only way you can get to Celebration Key is on one of our cruises.
Moreover, we just recently announced a change that signals more about the shift in our destination asset strategy. Half Moon Key, the highly rated and award winning exclusive Bahamian destination known for beautiful beaches and crystal clear waters is being renamed Relax Away, Half Moon Cay to better reflect the experience guests can expect as they are immersed in this tropical paradise. Enhancements will include an expanded beachfront experience, lunch venues, a variety of bars and other features created with intentionality to reinforce this destination’s natural beauty and pristine appeal. Ready in summer of 2026, a newly constructed pier on the north side will allow 2 ships to dock, including Carnival’s XL class ships that will be able to visit the private island for the first time. We’ll be positioning these jewels of the Caribbean with consumers in a way that will encourage guests to actively seek out these specific destinations offered exclusively by our brands.
And many of Carnival Cruise Lines itineraries will feature both Relax Away, Half Moon Key and Celebration Key, providing guests with complementary experiences enjoying both the idyllic and the ultimate beach days. We believe developing and promoting these unique assets will help us cast the net wider and capture even more new to cruise demand. We’re already in flight with preparation for branding and marketing campaigns for these amazing destinations with more to come in the future. As it is, for 2025, we expect to hit our 2026 EBITDA per ALBD target a full year early, while raising ROIC to just shy of our 12% 2026 target. So considering all the progress we’ve made without this in place, it’s clear we have a tremendous amount of headroom remaining to create more demand to cultivate more guest loyalty and capture more pricing for the incredible ship and shoreside experiences we provide our guests.
At the same time, we’re making meaningful progress on the sustainability front. We achieved about 17.5% reduction in greenhouse gas emissions intensity versus 2019, on track to achieve our target of 20% by the end of 2026, a goal that was previously pulled forward by 4 years. Improvement hasn’t just been in emission intensity levels. Despite the fact that we’re over 9% larger than we were in 2019, we have actually lowered our absolute greenhouse gas emissions by almost 10% over this time. And of course, we’re also making huge strides on rebuilding our financial fortress.
In under 2 years, we’ve paid down over $8,000,000,000 of debt off our peak and significantly reduced interest expense, which coupled with our improving EBITDA has improved our leverage metrics tremendously. Our current 2025 guidance will put us at 3.8 times net debt to EBITDA, closing in on our expectation to reach investment grade leverage metrics in 2026. Again, thank you so much to each of our team members who have delivered a step change improvement in 2024 and set us up for a fantastic 2025 and beyond. And as has always been the case and always will be, thank you so much to our travel agent partners who have contributed immensely to this success. We also appreciate the support we’ve received from our loyal guests, investors, destination partners and other stakeholders.
And let’s not forget, these efforts were really all about the main thing, delivering unforgettable happiness to over 13,500,000 people in 2024 by providing them with extraordinary cruise vacations, while honoring the integrity of every ocean we sail, place we visit and life we touch. With that, I’ll turn the call over to David.
David Bernstein, Chief Financial Officer, Carnival Corporation: Thank you, Josh. I’ll start today with a summary of our 2024 Q4 results. Next (LON:NXT), I will provide an update on our refinancing and deleveraging efforts. Then I’ll finish up with some color on our 2025 full year December guidance. Let’s turn to the summary of our 4th quarter results.
Net income exceeded September guidance by $126,000,000 as we outperformed once again. The outperformance was essentially driven by 3 things. 1st, favorability in revenue were $77,000,000 as yields came in up 6.7% compared to the prior year. This was 1.7 points better than September guidance, driven by close in strength in ticket prices as well as strong onboard spending. 2nd, cruise costs without fuel per available lower birthday or ALBD came in up 7.4% compared to the prior year.
This was 0.6 point better than September guidance, which was worth $13,000,000 And third, favorability in interest expense, other income and expense and tax expense, all of which were partially offset by higher fuel prices netted to a $38,000,000 improvement. Per diems for the 4th quarter improved over 5% versus the prior year, which I would remind you were up over 10% last year, with improvements on both sides of the Atlantic driven by higher ticket prices and improved onboard spending. Strong demand allowed us to once again report records, delivering 4th quarter record revenues, record yields, record per diems, record adjusted EBITDA and record customer deposits. Next, I will provide an update of our refinancing and deleveraging efforts. Our full year 2024 yield improvement of 11% was over 3 times our 3.5% cost increase.
This drove improved margins and cash flow, which resulted in a strong EBITDA of $6,100,000,000 and cash from operations of about 6,000,000,000 dollars All of this propelled us on our journey to pay down debt and proactively manage our debt profile. During 2024, we made debt payments of over $5,000,000,000 which included opportunistically prepaying over $3,000,000,000 of debt, reducing secured debt, removing the secured second lien layer from our capital structure and paying off some of our more expensive debt. We ended 2024 with $27,500,000,000 of debt, over $8,000,000,000 off the January 2023 peak. Our leverage metrics continued to improve in 2024 as our EBITDA continued to grow and our debt levels continued to shrink. We achieved a 4.3 times net debt to EBITDA ratio, nearly a 2.5 turn improvement from 2023, positioning us 3 fourths the way down the path to investment grade leverage metrics in just 1 year.
With the benefit of well managed near term maturity towers and improved leverage metrics, we expect to opportunistically capitalize on improved interest rates while proactively managing our maturity towers for 2027 and beyond with various refinancings. Now I’ll finish up with some color on our 2025 full year December guidance. On top of 2024’s 11% yield growth, we are expecting to deliver strong 2025 yield improvement with our guidance forecasting an increase of approximately 4.2% worth over $0.60 per share when compared to 2024. The strong improvement in 2025 yields is a result of an increase in higher ticket prices, higher onboard spending and to a lesser degree higher occupancy with all three components improving on both sides of the Atlantic. We are well positioned to drive 2025 ticket pricing higher with significantly less inventory remaining to sell than the same time last year.
Now turning to costs. Cruise costs without fuel per ALBD is expected to be up approximately 3.7%, costing $0.28 per share for 2025 versus 2024. We are looking forward to the introduction of our game changing exclusive Bahamian destination, Celebration Key in July 2025. We anticipate that Celebration Key will be a smash hit with our guests and provide an excellent return on our investment. However, operating expenses for the destination will impact our overall year over year cost comparisons by about half a point.
In 2025, we are expecting 687 tri dock days, an increase of 17% versus 2024, which will also impact our overall year over year over year cost comparison by about 3 quarters of a point. In 2024, there were several one time items that we benefited from impacting our overall year over year cost comparisons by about a quarter of a point. The remaining 2.2. Increase in cruise costs are driven by inflation and higher advertising expense, partially offset by efficiency initiatives and further leveraging our industry leading scale. An increase in depreciation expense and lower interest income is partially offset by an improvement in interest expense from our refinancing and deleveraging efforts for a net impact of $0.04 per share.
The net impact of fuel price and currency is expected to favorably impact 2025 by approximately $0.04 per share, with fuel prices favorable by approximately $0.09 per share, while the change in foreign currency exchange rate goes the other way by $0.05 per share. Let’s not forget that the European Union allowance or EUA regulation in 2025 increases to 70% of carbon emissions from 40% in 2024. As a result, we would expect the impact of higher EUA costs on our year over year fuel expense to be about $0.03 per share. In summary, putting all these factors together, our net income guidance for full year 2025 is over $2,300,000,000 an improvement of more than $400,000,000 versus 20.24 or $0.28 per share. Robust demand for our brands and continued operational execution is driving our strong financial results along with our increased confidence in achieving investment grade leverage metrics during the next couple of years as we move further down the road rebuilding our financial fortress, while continuing the process of transferring value from debt holders back to shareholders.
Now, operator, let’s open the call for questions.
Conference Operator: Certainly. We will now be conducting a question and answer session. Our first question today is coming from Matthew Boss from JPMorgan. Your line is now live.
Matthew Boss, Analyst, JPMorgan: Great. Thanks and congrats on another great quarter.
Josh Weinstein, CEO, Carnival Corporation: Thank you very much, Matt.
Matthew Boss, Analyst, JPMorgan: So Josh, could you elaborate on the foundation that you’ve laid over the last 2 years, which you think has positioned you and the company to capitalize on the current demand that you’re seeing? And with 2025 shaping up to be another banner year, could you speak to initiatives across the organization to take share, optimize yields and drive onboard spending in 2025 beyond?
Josh Weinstein, CEO, Carnival Corporation: Yes. Thanks for the question, Matt. I guess if we look back at the last 2 years, probably the biggest thing was just doing a bit of restructuring as we’ve talked about in the past and getting the right leaders in place leading the brands and those leaders are a fantastic group of people leading fantastic brands. On the commercial focus side, which we’ve been talking about for the last few years, right, it is scrutiny and expectations around how we’re improving in the revenue management space, in the marketing space, considerations at top of funnel stuff all the way down to closing the bookings. The amount of advertising that we’ve ramped up really just to get us closer to where the rest of the market is, I think is helping to pay dividends.
Everything from making sure our brands have great relationships with the trade to investing in our own capabilities. Probably the last thing about the foundation would be the portfolio management. We’ve been actively managing the portfolio and allocating ships differently, moving vessels, winding up a brand in the case of P and O Australia. I think it’s setting ourselves up to really put the assets where the highest returns are in the immediate term in the immediate term, while we help all the brands who aren’t yet where I think they should be, get to those levels. So with respect to 2025 and what are the things that we’ve got that are going to continue our progress, at a base level, it’s a continuation of all those things in the commercial space and having those great brand leaders really lean in even further.
We’re investing in our people. We’re investing in our tools, our revenue management tools to make sure that we are utilizing the technology effectively to optimize the yields. The destination strategy that you already heard in the prepared remarks, I think that’s going to be a tailwind that continues for a really long time and we’re really looking forward to that. As far as the OBR onboard spending, we’ve got runway there. I mean, we’ve got a good amount of runway to continue the progress we’ve been making around pulling forward the spend, which as everybody knows opens up the 2nd wallet and the more people spend before they get on the cruise, the more they spend on the cruise.
So our brands are again working hard to continue that and we’re nowhere near what the cap could be on those types of efforts. So I’m pretty enthusiastic as you could probably tell.
Matthew Boss, Analyst, JPMorgan: I can tell. I can tell. And then David, maybe just quick, if you could just break down net cruise cost ex fuel components in that 3.7% for this year, but I think more so, how best to think about maybe a reasonable spread between yields and cruise costs multi year, if there’s maybe a back of the envelope rule of thumb multi year?
David Bernstein, Chief Financial Officer, Carnival Corporation: Yes. So I did in my notes talk about the 3.7 because just briefly, the expenses relating to Celebration Key were 0.5. Increase in dry dock days was 0.75. I also said about 0.25. Was the one time items that we benefited from in 2024.
And then the remaining 2.2 points really was a combination of inflation and higher advertising that Josh mentioned, partially offset by efficiency initiatives and other leveraging our scale throughout the company. So those are really the 4 key components that mix up to 3.7. As far as the difference, I don’t think there’s any rule of thumb here. I really do believe we can continue. As you saw in 2024, it was 3 times, but that was a recovery story.
Our guidance has a 0.5 point difference between a yield improvement and a cost improvement. Keep in mind that a point of yield is worth almost double what a point of cost is. So there is leverage there in and of itself. But we will work hard to continue to maintain our cost consciousness. And as Josh talked about, all the things we’re investing in, in advertising and revenue management should help drive yields higher over time as well as the destination strategy.
So we do expect to see a continued improvement in margins.
Matthew Boss, Analyst, JPMorgan: Great color. Best of luck.
Conference Operator: Thank you. Next question is coming from Ben Chaikin from Mizuho (NYSE:MFG) Securities. Your line is now live.
Ben Chaikin, Analyst, Mizuho Securities: Hey, thanks for taking my questions. Celebration key looks pretty exciting, opening up later this summer. Where do you think you are in the customer awareness of this product? Do you think it’s well understood, appreciated by customers? Or is it still or is that marketing kind of like and then awareness still ramping?
And then I have one follow-up. Thanks.
Josh Weinstein, CEO, Carnival Corporation: Sure. Thanks, Matt. Definitely still ramping. I mean, it doesn’t exist yet. So, we are definitely building momentum there.
We’re building excitement. We’re getting the response that we expected with respect to how the bookings are shaping up, which is good to see, but it’s still early days. I think the really exciting part is once we’re in there really operating and having guests enjoy these experiences and optimizing what we do and how we do it, it takes off from there because right now it’s make believe. So we got to let everything get in place and then I think it will help tremendously.
Ben Chaikin, Analyst, Mizuho Securities: Got it. Understood. And then in the release and call transcript, you referenced an enhanced destination strategy. Can we open this up a little bit? Does this refer to Celebration Key or is this a little bit of a teaser to an additional opportunities to provide guests with differentiated Carnival owned operated destination?
I know you mentioned the pier at Half Moon K, I believe. Just trying to understand the magnitude and direction of the strategy. Thanks.
Josh Weinstein, CEO, Carnival Corporation: Yes. So let’s take a step back from any one particular destination. I think what I’ve seen for a long time now for several years that I think some are doing better than others and better than us is turning their own destinations into something that not only guests, but non cruisers look at and decide that’s going to help tilt my vacation decision to take a cruise because the destination itself looks amazing, is an amazing experience and I can only do it on a cruise. And we have not historically I think done a good enough job in raising the level of awareness on the amazing destinations that we have and that are in the pipeline. So when it comes to Celebration Key, we’re getting a head start because we’re doing it before the location exists.
When you think about the change to relax away for Half Moon Key, it is beautiful. It is one of the most stunning destinations in the world. And yet if you’re not a cruiser, you don’t know anything about it. You’re not looking for it. And we’re going to change that dynamic.
And with Relax A Way, what we’re trying to convey to people who don’t cruise is really the vibe of the experience that they can get. And the great thing about it is we’re leaning into that natural beauty, which is going to be different from Celebration Key. Celebration Key, as we said, that is the ultimate beach day, right? Relax away is all about the idyllic. It’s being in a tropical paradise and we’re going to be able to marry those two things together.
So people on the same cruise will be able to get both experiences that are very, very different and exclusive to us. So we’re going to raise our game there. And there’s more things that we can do without heavy investment with some of the destinations that we own to make that part of that more exclusive collection. So early days, but we’re pretty excited about it.
Ben Chaikin, Analyst, Mizuho Securities: Very helpful. Thanks.
Conference Operator: Thank you. Next question is coming from Steve Bircinski from Stifel. Your line is now live.
Steve Bircinski, Analyst, Stifel: Yes. Hey, guys. Good morning. Happy holidays to tell you guys. So Josh or David, if we think about the yield guidance for 2025, just based on the fact that you’re 2 thirds booked already for next year, it seems like you have strong pricing momentum across pretty much all your geographies.
I know you’ll hate that I say this, but it seems like the 4% or approximate 4% yield guidance to us might end up being conservative when we have this same call a year from now. So I guess the question is, can you give us a little color around the makeup of that yield forecast? And maybe Dust, it seems like you could be taking a conservative view around whether it’s onboard trends, whether it’s the close end pricing opportunity. And if I ask that question another way, I mean, if we think about the your initial yield guidance last year, which I think was 8.5% and it ended up closer to about 11%. What did you guys underestimate for 2024?
Thanks.
Josh Weinstein, CEO, Carnival Corporation: Hey, Steve. Well, first of all, we were a little worried you weren’t 1st in the queue. So we’re going to literally call 911 to make sure you were okay. So glad to hear your voice. All good.
Conference Operator: Good, good, good.
Josh Weinstein, CEO, Carnival Corporation: Look, our goal is to give guidance based on what we know, and it’s certainly something that we want to meet and obviously work hard to exceed. Last year, I meant what I said in my prepared remarks, I think it was a fantastic year by the whole team. That outperformance was I would argue was pretty special. And also argue that 2 50 basis points of yield on top of a base of 8.5%, proportionally is not 2.5% on top of 4.2%. So we have a very good handle I think on where we are today much more so than last year even because we’re already back up in full already at the full occupancy percentage more or less that we always get.
And if you remember the first half of the year was still a catch up which is like 5 points of our improvement in yields last year was occupancy. So I think we’re in a more stable place than we were. Well, the onboard spends have been fantastic. There’s no doubt about it and we’re working hard to continue that trend. And when you look at the 4.2%, there’s a little bit for occupancy, but it’s all price, right?
Outside of a little bit of occupancy, it’s price and it is a combination of the ticket side and the onboard spot continuing. And we’ll work hard to optimize as much as we can. I promise you, our goal is the same as yours, which is get as much revenue as we can.
Steve Bircinski, Analyst, Stifel: Okay. That’s good color. And then Josh, if we look at Slide 17, about SeaChange (OTC:SEAC), you noted your EBITDA per LBD is going to be hopefully achieved in 2025. But if we look at your ROIC targets, we look at the even the carbon reduction target, I mean, it’s almost like you’re going to hit those potentially hit those as well next year. So I guess the question is, do you and I know you’re going to hate this, but do you start to think about laying out another set of long range financial targets at some point?
To us, it seems like those SeaChange targets really were important pillars and gave the investment community something to really rally behind. So I’m just trying to get a little bit more color as how you’re thinking about the long term opportunities here.
Josh Weinstein, CEO, Carnival Corporation: Yes. Look, when we get there, I can tell you that whether we do it on the same day or whether we wait a quarter to catch our breath, I can promise you I like the concept of longer term targets that we set for ourselves and we set for our investors, so you can understand what we think our trajectory should be. And I can motivate my team internally to rally around what I think we should be expecting of ourselves. So yes, you can expect that to happen when we get there. And look, I’d love nothing more to get to where we were where we say we’re going to be in 2026 SeaChange targets early.
We need about $100,000,000 of operating income to get to the ROIC. Carbon will be harder. We have a pretty good understanding of where we are. But getting to 19% is pretty good and we’ll see what happens.
Steve Bircinski, Analyst, Stifel: Okay. Got you. And real quick housekeeping wise. David, is there anything we should think about in terms of cadence of costs? Obviously, we’ve got the Q1 NCC (NS:NCCL) guide, but anything else through the rest of the year we should think about?
David Bernstein, Chief Financial Officer, Carnival Corporation: So as you can imagine, it is tough in terms of seasonalization between quarters. But the guidance I would give you is that in the Q2, we do expect higher dry dock days. So I wouldn’t be surprised if the second and third quarter were, call it, 1.5 to 2 points above the full year average and the 4th quarter is lower. That’s about the best initial guidance I can give you. But we too will probably see some changes because this guidance presumes we’ve made every decision on all advertising and everything else between the quarters.
So just take it as a forecast.
Steve Bircinski, Analyst, Stifel: Okay. Thanks, guys. Happy holidays.
Conference Operator: You too, Steve. Thank you. Next question is coming from Robin Farley from UBS. Your line is now live.
Robin Farley, Analyst, UBS: Great. Thank you. Obviously, fantastic guidance here and better than expected. I did want to ask about 2 things just to get a feel for whether these things are in your guidance or how much they’re in your guidance and whether this would be additional upside. First is, at celebration key, you mentioned obviously expected to be very successful and a driver, but you’re not really able to see at this point what it would add really to ticket price or onboard spend.
So I’m just wondering if you could help us understand how much or really how little you may have in your yield guidance today for Celebration Key. I know in your cruise cost guidance is that 50 basis points. How much is it in your yield guidance at the moment? Thanks.
Josh Weinstein, CEO, Carnival Corporation: Yes. Thanks, Robin. So it is in our guidance, but I’ll give you some magnitude of just what touches Celebration Key this year and it’s only 5% of our total sailings in 2025. So it’s not that much. When we get to 2026 and we’re on kind of a full year run rate basis, you’re talking about 15% plus.
So it will be more meaningful for the company overall. Nonetheless, I’m not going to say what it is, but we’re happy to say that when we look at our bookings in the Q4 for Carnival, we are seeing the premium that we expected to see, which is good to see.
Robin Farley, Analyst, UBS: Okay, great. Thank you. And then also in your EPS guidance, I think that you have $3,000,000,000 in debt that’s callable next year. I hope I’m getting this number right. But if and I assume that you’re not factoring in the lower interest costs from some of that very expensive debt.
If that were redone at maybe what some other things this year have been done at, could that be $0.20 or $0.25 of sort of upside in annual interest expense savings? Is that kind of the ballpark to think about potential upside?
David Bernstein, Chief Financial Officer, Carnival Corporation: So $0.20 to $0.25 would be $280,000,000 because it’s $0.14 per penny. So just keep that in mind. I’m not sure what you were thinking of. I will say that there is opportunity on the refinancings. We do expect to address those 2 double digit interest rate debts that you’re referring to.
They’re both callable, as you said, in the first half of the year. There will be some additional savings. We do we will look at that throughout the year. We did include just a bit of interest savings in our forecast, but because we’re not sure what the market will bring in terms of interest rates to us. So there is hopefully, we’ll have a number of successful transactions this year, which will provide some upside or I should say some lower interest expense.
Robin Farley, Analyst, UBS: Okay, great. Thanks very much.
Josh Weinstein, CEO, Carnival Corporation: Thanks, Rob.
Conference Operator: Thank you. Next question is coming from James Hardiman from Citi. Your line is now live.
James Hardiman, Analyst, Citi: Hey, good morning. So I wanted
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation0: to ask maybe a big picture question. Obviously, not a whole lot of capacity being added here. And so, so much of this growth story is organic, obviously. And so I guess my first question is, how much of that organic turnaround do you think is a function of sort of factors taking place in the industry versus, I don’t know, self help, right? You listed obviously a whole bunch of things that you’re doing brand by brand.
I’m ultimately trying to figure out sort of the sustainability of this organic growth that we’re seeing right now.
Josh Weinstein, CEO, Carnival Corporation: Yes. Hi, James. How are you doing? Man, I wish I could tell you what the scientific answer to your question is about the industry overall versus us. I think the industry being more mainstream along with us is certainly a fantastic thing for everybody.
And I don’t want to discount that. But I meant what I said about same ship sales. We got almost 10% yields on same ship. And if you look at our history, our historic growth rates on revenue are significantly lower than our cruise competitor set. And when you look I don’t know what they’re going to do next year, but when you look at this year, we’re right in the mix and are at the top.
So I feel very good that our trajectory is changing for us versus what we had been accustomed to and it means we’ve got a pretty good amount of headroom as we look forward because people should be paying more for our experiences. Not only vis a vis our cruise competitors, but I’m talking about vis a vis the experience gap that exists on what we do versus what land offers, what we call the price to experience ratio is just remarkably skewed and we should be getting a lot more versus what land competitors do.
Matthew Boss, Analyst, JPMorgan: And I think it’s probably a
Josh Weinstein, CEO, Carnival Corporation: pretty good sign that I’m right about that and the potential when you think about Disney (NYSE:DIS), basically say we’re going to under invest in things that we have in the past, but we’re going to down on crews. They see the value of that as well. So I think we’re in good company and we’ve got a lot of self help along the way.
James Hardiman, Analyst, Citi: Got it. And then,
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation0: I guess along those same lines, although, I guess, in a lot of ways, I’m asking some previous questions in a different way. But you finished 24% with per diems up north of 5%. The guidance for the year, I guess, yield guidance is 4.2%. There’s some occupancy in there. And then Q1 is 4.6%.
So we’re going 5 plus to 4.6% to something lower. I guess from our perspective, right, Celebration Key, which comes on in the back half should actually help with some acceleration. I guess is there anything quantifiable that we should be thinking about that would weigh on per diems as we work our way through the year, maybe an itinerary geographical mix issue? Or is this just you get some version of this question every quarter, right? Is this just sort of conservatism to further out you look?
Josh Weinstein, CEO, Carnival Corporation: I guess, same answers that we’ve been giving, right? We’re trying to be as transparent as we can be with everyone on the call and everyone who’s not on the call. We haven’t been through Wave yet. We will although it’s been a remarkable ride for 2 years, it feels like Wave hasn’t stopped since summer of 2022. But we haven’t been there yet.
And so we’ll see what that brings us. And we’ll talk again in March.
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation0: Got it. Appreciate it.
Conference Operator: Thank you. Next question is coming from Patrick Scholes from Churys. Your line is now live. Patrick, your phone is on mute.
David Bernstein, Chief Financial Officer, Carnival Corporation: Hi, good morning. Can you hear me?
Josh Weinstein, CEO, Carnival Corporation: Yes, Patrick.
David Bernstein, Chief Financial Officer, Carnival Corporation: Great, great. Thank you. I’d like to ask
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation1: a little bit about Mexico for my first question. Some news out there lately regarding additional passenger charges on that. Do you Josh, do you think that’s a done deal? Or is there any chance that that may not go through at this point? And then specifically for your folks, for your ships, what percentage of your itineraries do make a stop at a port in Mexico?
That’s my first question. Thank you.
Josh Weinstein, CEO, Carnival Corporation: Yes. So right off the bat, no, I do not think it is a done deal. We’ve been dealing with this with the folks in Mexico for the last few weeks. We were not consulted. No one was consulted when this was passed.
It was pretty it’s pretty clear to me. I have a lot of respect for the President and what she’s doing, but she was misinformed, not informed and no one was thinking through the ramifications of what they were suggesting. And there’s a reason why Cruise is in transit historically, as opposed to people who fly into Mexico and stay there for several days. So it’s already been pushed off to July 1. We’re not satisfied with that.
We want to have good dialogue with the government and explain all the benefits that we bring to Mexico which are significant and it doesn’t take much, to tweak itineraries to effectively erase what the proposed tax is on the industry. And so I feel we are engaged in those conversations. We hope to have more after the New Year, but it’s definitely not settled and we have nothing in the forecast for these changes for the tax, just so everybody knows, nothing for
Steve Bircinski, Analyst, Stifel: the
Josh Weinstein, CEO, Carnival Corporation: year. As far as what the impact would be, for 2020, 25, assuming it did go into place and we made no changes, starting in July of 2025. It’s less than 5% of our itineraries for the year for the remainder of the year.
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation1: Okay. Thank you. Certainly, the fluid situation. And then a follow-up question is on the year over year growth rate in your passenger ticket revenues versus year over year growth rate in your commissions, transportation and other. The past several quarters, those growth rates sort of moved in line or lockstep.
This most recent quarter, you did have a noticeable increase in passenger ticket revenue percentages higher than the commissions paid out. Are you starting to see more book direct or anything to read into that? Thank you.
David Bernstein, Chief Financial Officer, Carnival Corporation: Patrika, we should talk after the call. I thought it was a pretty close, I thought it was a 0.10% or something, it was very close revenue.
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation1: Okay. I would come up a little bit. We’ll talk about that after the call. But anything else to
David Bernstein, Chief Financial Officer, Carnival Corporation: consider. I mean, the numbers, as you know, do vary a little bit from quarter to quarter because of currency and the amount of air sea mix that we have, but nothing significant otherwise.
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation1: Okay. Thank you for the clarification.
Conference Operator: Thanks, Patrick. Thank you. Next question today is coming from David Katz from Jefferies. Your line is now live.
James Hardiman, Analyst, Citi: Hi, afternoon. Covered a thank you for taking my question. Covered a lot already. I wanted to get a sense for the cost side of the equation, right? And the variability within there, right?
The degree to which and what would have to happen for you to turn out a little bit better on the cost increases that you may have built into your guidance? And then I have a quick follow-up.
David Bernstein, Chief Financial Officer, Carnival Corporation: Yes. So the if we’re talking about the full year and the 3.7%, the thing that is likely to change over time is most likely to be the efficiencies we find in the magnitude of those efficiencies. We are constantly working hard. We have lots of ideas out there. It is always very difficult to figure out the exact timing.
And we did build quite a bit into our guidance and into our forecast. But we continue to work hard to improve on those. And so last year, we were able to exceed what our expectations were, and we’ll work hard to try to do better this year. But it’s very hard on the timing of all these items. Plus, we built in inflation something a little bit less than 3% and trying to get that number perfect.
I mean if you know absolutely in every category what inflation will be in 20 25, let me know because we did the best we could. But I’m sure some of those pieces are going to be off. As I always say, there’s only one thing I know about every forecast that’s wrong. I just don’t know by how much and in what direction.
James Hardiman, Analyst, Citi: Well said. I wanted to follow-up just on the leverage side of things. When I look back historically at where the company has operated, obviously making good progress today, but should we be thinking about the 2 times or better as a long term aspirational target? Is that still achievable?
Josh Weinstein, CEO, Carnival Corporation: Well, I’m proud former treasurer of the company. It’s not a target we have for ourselves right now. Our target right now is get to investment grade metrics, which is at the 3.5 times. How strong we want to rebuild that fortress, that’s still up for that’s up for a decision. Do we need to be an A- rated company again bordering on A, which is some of the situations we found ourselves in?
I could argue, no, we don’t need to. Do we want to be a solid investment grade? Absolutely. So as we get closer to that metric, we’re obviously going to be having conversations with our Board to really set out what we think the right balance is between that balance sheet strength, investing in ourselves, investing in our shareholder returns via dividends or buybacks will remains to be seen, what the form will be and when. But that all goes into the mix.
But I’d say nobody should be thinking about a 2 time as a target we’re setting for ourselves.
James Hardiman, Analyst, Citi: Thank you very much. Appreciate it.
Josh Weinstein, CEO, Carnival Corporation: Yes.
Conference Operator: Thank you. Next question today is coming from Jamie Katz from Morgan Stanley (NYSE:MS) I’m sorry for Morningstar. Your line is now live.
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation2: Hey, good morning. Thank you for taking my questions. First, I’m hoping that you guys can talk a little bit about wave season. I guess I’m trying to understand how to think about balancing filling the rest of 2025 with pulling forward more demand from 2026 and whether or not one is a better maybe promote less in order to optimize pricing? Thanks.
Josh Weinstein, CEO, Carnival Corporation: Yes. Thanks. So it’s a little bit of a hard question to answer. We are actively and have been actively selling 20252026 for some time. As you might have picked up in the prepared remarks, we actually just had a record this past quarter for booking activity for the further year out, so 2026 in this case.
So I think our brands are actually when it comes to revenue management and optimizing the shape of the curve, they’re doing a pretty solid job across the board, which doesn’t mean there’s not a lot of room for improvement, but a pretty solid job. So everyone’s hitting Wave in slightly different positions with respect to how much they’re booked for 2025 and in what quarters. So I’d say it’s a case by case decision about how they’re going to be tackling Wave. I would say everybody does promotions in Wave, everyone. It’s how you get people interested in encouraging during this critical period.
But I would remind you, we did promotions last year in Wave and we ended up with 11% yields. So the promotional tactics and tools that we use are they’re healthy and they’re part of the process that we go through.
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation2: Yes. And then the other question I have is a little bit of a longer term strategic question, right? We know what the costs are affiliated with, Celebration Key this summer, but I suspect this isn’t a 1 and done project. So is there some non newbuild CapEx we should be thinking of like level that will be in these brand building projects longer term that might be higher than it was in the past?
Josh Weinstein, CEO, Carnival Corporation: That’s a fair question. I think if you think about the things that we’ve been investing in outside of the new build, Celebration Key, the Pier at Half Moon Key, Aida Evolution, right, which is their midship refurbishment plan. And AIDA is much to Carnival’s chagrin, AIDA is pretty much neck and neck with Carnival for highest returning brand in our portfolio. We’re making the right investments in non newbuild to continue the momentum that we have. As far as what the ultimate level is on a run rate basis goes, we don’t I don’t have a number for you that I’d stick to that says over the next 6 years or 7 years this is what you should expect.
But clearly, we’re making these investments on the basis that they’re going to support the improved returns that we demand of ourselves. So it’s about $600,000,000 for Celebration Key as we’ve talked about. It’s another few $100,000,000 for what we’re doing at Relax Away Half Moon Key. And I. E.
The evolutions for any one particular ship that they’re going through this process, you’re talking about tens of millions, but we think it’s tens of 1,000,000 that really is going to be a boost for a brand that is incredibly high returning. So, I don’t know, David, if you want to add any more color.
David Bernstein, Chief Financial Officer, Carnival Corporation: Yes. The only thing I’d say is, I mean, you saw in the press release what our number was for 2025. Likelihood, it’s going to be something similar to that going forward, but it’s hard to say exactly what it will be every single year, because there’s so many bigger decisions that we’ll be making over time, which will make up that number. One thing
Josh Weinstein, CEO, Carnival Corporation: I would say about the destination side is, Celebration Quay and Hatemont Quay are a little bit unique in the scope and size of what we’re doing. The other destinations we have in our footprint, they’re amazing and we will spend some money over time to do some things and make the experience better and better opportunity for us to generate returns. But I don’t see other than maybe a continued expansion of Celebration Key as we’ve already been talking about through the end of this decade. I’m not sure I see on the horizon anything that I’d flag for you right now is kind of out of the blue that we’d be talking about in 6 months or a year.
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation2: Great. Thank you.
Conference Operator: Last one. Thanks. Go ahead. I’m sorry.
David Bernstein, Chief Financial Officer, Carnival Corporation: Yes. We’ll just take one more question. We’re approaching it now.
Conference Operator: Sure thing. Our final question today is coming from Brent Mantua from Barclays (LON:BARC). Your line is now live.
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation3: Good morning, everybody. Thanks for taking my question and congratulations on the results today. So the first question you’re welcome. So the first question is on the booking curve, Josh, and I don’t know if this is an easy one to answer. But when you try and take forecasting out of it and you just focus in on your booking curve today versus the way or versus how your bookings looked at the same time last year, does the pricing look any less robust than this time last year perhaps tougher comps or anything else that you would highlight?
Josh Weinstein, CEO, Carnival Corporation: Bob, it’s certainly tougher comps this year than it was last year. The brands are as I said though in the prepared remarks, we’re basically at a higher occupancy at a higher price point and that’s across all four quarters. So I think the question the way you’d like it to, but we’ll see where that shakes out. We gave you our view of yields as of now and we’ll update you as there’s things to update.
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation3: Okay, great. Thanks. And then just a quick housekeeping. The Red Sea had something like $130,000,000 impact last year. How much of that effectively do you get back in 2025?
And sort of how should we think about the timing of it and the cadence and where it would kind of show up in the comps?
Josh Weinstein, CEO, Carnival Corporation: Yes. So I think when it all shook out, it was probably a little less than $100,000,000 at the end of the day as we did our analysis for 2024. I think the thing about year over year for 2025 that people need to keep in mind is it’s not a huge spring back. And the reason why is if you think about this time last year, we had already sold our world cruises. People were already on them before the Red Sea became a thing.
We had to scramble. We did everything we had to do. It cost us $90,000,000 This year, we’re in a different place, which is we knowingly took Red Sea out of the equation back in February, March for 2025, which meant we had to sell cruises that weren’t necessarily as attractive to sell because you can’t go through the Red Sea. And so from a year over year, it’s a different kind of pain point that we had to deal with and we’ve dealt with and it’s in our numbers. But it means that what you’d love to see is kind of this bounce back and we’re whole and we move forward.
I don’t think 2025 versus 2024 is really the year that we’ll see that. The normalization is now and so 26 versus 2025 will be on an apples to apples basis.
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation3: Okay. So lower yields offsetting no disruption
Josh Weinstein, CEO, Carnival Corporation: this year? Yes, more or less in high level, yes, that’s fair.
Beth Roberts, Senior Vice President, Investor Relations, Carnival Corporation3: Okay. All right. Congrats again, guys. Thanks.
Josh Weinstein, CEO, Carnival Corporation: Thanks very much, Brandon. Okay. So with that, I think we’re over time. So I’d say happy holidays and wishing everybody on the call nothing but, good health and happiness in 2025. Thanks very much for joining.
Conference Operator: Thank you. That does conclude today’s teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
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