Proactive Investors - Carnival (NYSE:CCL) is preparing to report its 2Q earnings while the cruise industry is undergoing a “sea-change” of new opportunities following the COVID-19 years.
Analysts at UBS believe that the post-pandemic cruise industry is navigating massive changes in a bid to increase its capacity.
According to the analysts, the estimated growth rate for North American and global industry capacity from 2019 to 2023 is expected to be around 3.5-4.5%, which is lower compared to the pre-Covid growth rate of 6-7%.
Looking ahead, that global industry capacity from 2023 to 2026 will grow at a gross compound annual growth rate (CAGR) of around 4-5%, but the net growth rate is expected to be lower than the gross rate.
UBS noted that no new ships have been ordered in more than three years, and there may not be any ordered this year.
Carnival, the biggest cruise ship operator, has said it will not order any new ships in 2026, and may only order one ship per year from 2027 compared to the three ships per year before the pandemic.
“Since the start of the year, investors have come to appreciate that lower demand last year was not macro driven and was not due to any permanent impairment in cruise demand,” UBS analysts wrote in a report looking at the outlook for the cruise industry.
“With restrictions lifted by (the fourth quarter of 2022), cruise lines now have a strong demand outlook for '23, plus the benefit next year of easy occupancy comparisons and a significantly wider gap to land-based hotel prices that bodes well for cruise yield.”
While competitor Royal Caribbean is a top pick, UBS analysts have a Buy rating on Carnival and rate Norwegian Cruise Line Holdings Ltd as Neutral.
Carnival is expected to report a loss per share of $0.38, while the Street’s expectation is for a loss per share of $0.35 per Zacks Consensus Estimate. Revenue is expected to be around $4.43 billion.