Leisure travel company Carnival Corporation & plc (CCL) operates in the United States, Canada, Continental Europe, the United Kingdom, Australia, New Zealand, Asia, and internationally.

On September 30, 2022, CCL's CEO, Josh Weinstein, said, "Since announcing the relaxation of our protocols last month, we have seen a meaningful improvement in booking volumes and are now running considerably ahead of strong 2019 levels." The company's revenue in the third quarter ended August 31, 2022, came in at $4.30 billion, up 688.5% year-over-year.

However, it missed analysts' average estimate of $4.90 billion, according to IBES data from Refinitiv. Over the past month, CCL has lost 20.7% to close the last trading session at $7.43. It has lost 63.1% year-to-date and 70.8% over the past year.

CCL is trading lower than its 50-day moving average of $9.69 and its 200-day moving average of $14.95. Moreover, the stock has lost 70.6% since hitting its 52-week high of $25.29 on November 5, 2021.

Here is what could shape CCL's performance in the near term:

Weakening Balance Sheet

CCL's cash and cash equivalents came in at $7.07 billion for the period that ended August 31, 2022, compared to $8.94 billion for the period that ended November 30, 2021.

Its total current assets came in at $8.43 billion, compared to $10.13 billion, while its long-term debt came in at $28.52 billion, compared to $28.51 billion for the same period.

Negative Profit Margins

CCL's trailing-12-month gross profit margin of 25.55% is 29.8% lower than the industry average of 36.38%. Its trailing-12-month EBITDA and net income margins of negative 26.89% and 73.98% are lower than the industry averages of 11.25% and 5.77%, respectively.

Furthermore, CCL's trailing-12-month ROCE, ROTC, and ROTA of negative 61.23%, 6.64%, and 13.70%, compared with the industry averages of 14.96%, 6.91%, and 5.12%, respectively.

POWR Ratings Reflect Bleak Prospects

CCL has an overall rating of D, equating to a Sell in our proprietary POWR Rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

CCL has a D grade for Quality, consistent with its lower-than-industry profit margins.

In addition, it has an F grade for Stability, in sync with its beta of 2.04.

In the 4-stock Travel – Cruises industry, CCL is ranked #2. The industry is rated F.

Click here for the additional POWR Ratings for CCL (Growth, Value, Momentum, and Sentiment).

View all the top stocks in the Travel – Cruises industry here. 

Bottom Line

CCL's revenue has declined at a 22.3% CAGR over the past three years. Its EPS is expected to remain negative in 2022. Moreover, its balance sheet is riddled with a declining cash balance and mounting debt. Given the stock's poor momentum, I think CCL might be best avoided now.

CCL shares fell $0.10 (-1.35%) in premarket trading Thursday. Year-to-date, CCL has declined -63.07%, versus a -19.69% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

More...