Shares of Carnival Corporation (NYSE: CCL) were down over 2% on Monday. The stock has dropped 47% year-to-date and 59% over the past 12 months. Last week the company reported its second quarter 2022 earnings results and although the key numbers missed expectations, they showed meaningful improvement which was encouraging.
Following the announcement, the sentiment around the stock has improved and although a full recovery could still take a while, there is optimism that the company is on the right course. Here’s why:
Carnival generated revenues of $2.4 billion in Q2 2022. This was significantly higher than the $50 million reported in the prior-year period. The top line also rose by nearly 50% compared to the first quarter of 2022, reflecting continued sequential improvement. For the cruise segments, revenue per passenger cruise day (PCD) was down slightly compared to a strong 2019 but onboard and other revenue per PCD increased significantly versus 2019.
Carnival reported a GAAP net loss of $1.8 billion and an adjusted net loss of $1.9 billion in the second quarter. This was narrower than the loss of $2.07 billion reported in the same period a year ago. The effects of the pandemic along with inflation and higher fuel prices are taking a toll on the company’s financial position. Carnival expects net losses for both the third quarter and the full year of 2022 but for now, the reduction in quarterly losses is a positive sign.
On its quarterly conference call, Carnival said it continues to see demand for cruise. The company now has over 90% of its fleet in service and is working on driving up occupancy and improving pricing. Occupancy increased to 69% in Q2 from 54% last quarter and this number has been approaching 80% in June.
The company managed to achieve this amid frequently changing and restrictive protocols. It has seen an increase in demand and expects this demand to continue to build with the relaxation of protocols. The appeal of cruises and the pent-up demand for travel globally are expected to act as tailwinds.
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