Carnival Earnings: Consumer Demand Signals Full Steam Ahead Through Higher Occupancy and Pricing

Narrow-moat Carnival’s second-quarter results indicate consumer appetite for travel remains robust despite increasing rhetoric around a stretched consumer in the media. During the period, as-reported net yields rose a whopping 12% while costs were basically flat, leading to adjusted EBITDA of $1.2 billion, more than 75% higher than in 2023. More importantly, the momentum in demand has persisted, with the North America and Australia, and Europe segments booking prices that are ahead of 2023 for the next two quarters and into 2025. While the third-quarter forecast includes yield growth that slows to 8%, this is a function of lower opportunity for occupancy gains and is handily above the low-single-digit average pricing gains captured in the decade prior to the pandemic. Moreover, even with yield growth pointing to a mid-single-digit rate in the fourth quarter, current booking patterns indicate 2025 could be on track for a mid-single-digit growth year, ahead of the 3% we have modeled currently.