CCL Market Research & Analysis Report
Updated Jan 12, 2016

Carnival Corporation (NYSE: CCL)

Trade Rationale:

CCL has demonstrated a pattern of positive technical signs, and it looks undervalued at this price level. CCL has exceeded all of the last 4 earnings estimates. CCL is building a new ship for the Chinese market which will help the company grow and with the low oil prices that are expected to last we can see the stock price to grow further. Our overall score for CCL is 7.5.

Stock Price Trends

Market cap 41.82B
Yesterday's close $53.94
52-weeks range $42.51 – $55.77
Technical analysis Positive

CCL Score: 7.5

Intrinsic value of the stock 8
Financials 6
Sentiment 8
Analyst ratings 8
Earnings Consistency 3
Total Debt/Equity 8
Quarterly EPS change 10
Annual Earnings Growth 2
Current Price Level 8
P/E Ratio 5
Insider Ownership 10
Technical Analysis 7
Sector:Services
Industry:Resorts & Casinos

Growth and Balance Sheet

The company reported net income of $270 million, or 35 cents diluted earnings per share for the fourth quarter of fiscal year 2015 ending November 30. That's up from net loss of $104 million, or 13 cents diluted loss per share for the same quarter last fiscal year. Diluted EPS for the total fiscal year was $2.26, up from $1.56 for the last year. Revenue for the fourth quarter was $3,711 million, virtually unchanged from $3,718 million for the same quarter last fiscal year. Net revenue yields per available lower berth day (ALBD) increased by 4.1% on constant currency basis in comparisons to the same quarter last fiscal year. Fuel prices declined 46% to $316 per metric ton for this quarter, from $366 for the same quarter last fiscal year. During the fourth quarter the company held the grand opening of Amber Cove, a new Carnival Corporation cruise facility on the northern coast of the Dominican Republic, and the launch of P&O Cruises (Australia’s) Pacific Aria and Pacific Eden. The operating margin improved from 7.12% for last year’s fourth quarter to 13.74% for the current quarter. Net cash provided by operating activities for the three months ending November 30, 2015 was $978 million, up from $637 million for the same period last year. Cash and cash equivalents as of November 30, 2015 were $1,395 million, in comparison to $331 million as of November 30, 2014. CCL forecasted EPS for the first quarter of fiscal year 2016 is expected to be from 31 cents to 33 cents, compared to actual loss per share of 3 cents for the first quarter of last fiscal year. The financial strength indicators of the company are at satisfactory levels. Company’s current ratio is 0.35 and the industry average ratio is 1.28. The quick ratio of 0.30 is also worse than the industry average of 1.13. The interest coverage ratio of 3.21 is in line with industry average of 3.61 and at healthy levels. In terms of efficiency and effectiveness, the asset turnover ratio of 0.40 is better than the industry average of 0.24; the inventory turnover ratio of 27.83 is better than the industry average ratio of 11.68; and the ROE of 7.32% is superior to the industry average of 3.90%. 

Valuation

CCL PE stands at 23.94 in line with the industry average of 22.92, and above the stock market average represented by the S&P 500 P/E of 21.63. The company is currently trading above the maximum P/E ratio of 15x, and over the last five years, the company’s shares have traded in the range of 13.70x to 28.25x trailing 12-month earnings. CCL's current Price/Sales of 2.65 is close to the average of its industry of 2.51. CCL’s head to head comparison to its main competitors shows that the company has comparable gross margin, but one that is below the industry average. The achieved operating margin by the company is average result among the competition, and it is also close to the industry average. The company quarterly revenue growth is flat and lowest result among the selected peers, and below the industry average. The company trades at the lowest P/E ratio of the selected peers. The P/S ratio is slightly above RCL ratio and below what NCLH is trading. CCL’s twelve trailing months EBITDA of $3.61 billion is the highest result from the selected peers, and above the industry average EBITDA of $215.76 million. The stock is currently trading below its intrinsic value of $70.08, this suggests that the stock is currently undervalued at these levels. The beta of 0.52 implies lower volatility of the stock with respect to the S&P 500. CCL has not shown favorable earnings consistency over the last five years. Moreover, company’s earnings have decreased by 1.81% over the same period. The current quarter earnings in comparison to the same quarter last year have increased by 369%. CCL’s current price levels are below the maximum level, 3.28% below the 52 week high of $55.77, and the technical analysis give positive view of the stock. The majority of analyst ratings are hold. CCL has a dividend payout ratio of 58% for the twelve trailing months and trailing annual dividend yield of 2.00%.

About CCL

Carnival Corporation is a cruise vacation company. The Company has three cruise segments that consist of North America cruise brands, Europe, Australia & Asia (EAA) cruise brands, and Cruise Support. In addition, it also has a Tour and Other segment. The Company offers its services under nine cruise brands. Its North America segment cruise brands include Carnival Cruise Lines, Holland America Line, Princess Cruises (Princess) and Seabourn. Its EAA segment cruise brands include AIDA Cruises (AIDA), Costa Cruises (Costa), Cunard, P&O Cruises (Australia) and P&O Cruises (United Kingdom). Its Cruise Support segment includes its cruise port and related facilities located in Cozumel, Mexico; Grand Turk, Turks and Caicos Islands, Roatan, Honduras and Puerto Plata, Dominican Republic. In addition to its cruise operations, it owns Holland America Princess Alaska Tours, a tour company in Alaska and the Canadian Yukon.

Competitor Comparison

CCL NCLH RCL Industry
Market Cap 41.80B 12.55B 20.65B 2.32B
Employees 91,300 24,900 63,400 5.20K
Qtrly Rev Growth 0 0.42 0.06 0.1
Revenue 15.71B 4.10B 8.21B 910.27M
Gross Margin 0.4 0.39 0.37 0.59
EBITDA 3.61B 1.09B 1.97B 215.76M
Operating Margin 0.13 0.16 0.14 0.12
Net Income 1.76B 363.22M 568.75M N/A
EPS 2.26 1.61 2.58 0.46
P/E 23.94 34.32 36.42 22.92
PEG 0.89 0.65 0.81 0.84
P/S 2.65 3.14 2.51 2.51

Carnival Corporation (NYSE: CCL) N.V.

Valuation
Market Cap 41.82B
Enterprise Value 49.03B
P/E 23.93
PEG Ratio 0.89
Price/Sales 2.65
Price/Book 1.75
EV/Revenue 3.12
EV/EBITDA 13.6
Dividend Yield 2.00%
Held by insiders 27.07%
   
CCL
Beta 0.52
1 Month Stock Returns 6.41%
Year to Date Stock Returns -0.99%
1 Year Stock Returns 18.88%
3 Year Stock Returns 15.49%
52-Week Change 17.36%
S&P500 52-Week Change -4.91%
52-Week High 55.77
52-Week Low 42.51
50-Day Moving Average 52.2
200-Day Moving Average 51.38

Highlights

Carnival Corporation operates as a cruise company worldwide. The stock closed yesterday’s trading session at $53.94. In the past year, the stock has hit a 52-week low of $42.51 and 52-week high of $55.77. The intrinsic value of the stock is above the current price. CCL has a market cap of $41.82 billion and is part of the Services sector.

CCL Strengths
  • Brands catering to diverse customer segments  
  • Significant presence across the globe mitigating dependency risk
CCL Weakness
  • Weak safety records may have negative impact on company’s reputation

CCL Intrinsic Value

EPSttm 2.26 Year EPS
EPS GROWTH(Assumption) 1.10 2016 2.49
PE 23.94 2017 2.75
DIVEDEND PAYOUT 48% 2018 3.04
EXPECTED STOCK RETURN 1.089 2019
2020
2021
3.36
3.70
4.09
Forecasted Stock Price in 2022 145.39 2022 4.51
Earnings Per Share after 10th year 6.07 2023
2024
2025
4.98
5.50
6.07
TOTAL EPS 40.51
TOTAL DIVIDENDS 19.45
Forecasted Stock Price in 2022-Dividends 164.83
Net Present Value 70.08
EPS Growth Value
8.89% 61.50
9.39% 64.24
9.89% 67.10
10.39% 70.08
10.89% 73.17
11.39% 76.40
11.89% 79.75
Based on the prospects of the company the valuation range is from $61.50 to $79.75.

Stock Valuation Model & Intrinsic Value Definitions

Current Price Level

Investors should keep an eye open for stocks that are trading within 10% of their 52-week highs, as it is likely to continue in its upward trend. CCL's 52 week high is $55.77, current price is $53.94, is 3.28% below the 52 week high.

P/E Ratio

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 years, must be "moderate", which in this model states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. The company has a P/E ratio of 23.94, the average industry P/E ratio is 22.92, and is above the S&P 500 P/E ratio of 21.63.

Insider Ownership

When there is strong insider ownership which we define as 8% or more, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders. Insiders own 27.07% of CCL stock. Management's representation is large enough. This does satisfy our minimum requirement; companies that pass this test are more attractive to our valuation model.

Technical Analysis

The model is using several technical indicators (MACD, RSI, MFI, OBV, position Indicators) to forecast the trend of the stock for 6 and 12 months, and assign a value.

CCL is trading in the range of $50.31 - $55.77 in the past 30 days. The stock has been showing support around the level of $49 and resistance in the $55 range. The stock is trading above the 50-Day Moving Average and above the 200-Day Moving Average. The RSI(14) is 57.74. The stock is in a long term bullish trend since October 2014. Looking at the chart on page 1 it can be seen that the trend has well continued into the past year. The stock is currently on the upper end of the ascending trading channel and if history is to repeat we can expect a short-term correction, which can be a good entry point, but the long term bullish trend is expected to continue. Our indicators give positive view of CCL.

Financials

The financial health of the company the higher the better, we evaluate all the financial ratios of the company.

Sentiment

Investor’s sentiment for the stock.

Analyst Ratings

The model assigns a value according to analyst’s recommendation for the stock. Analyst rating on Reuters.com are 9 Buy, 6 Outperform, and 10 Hold.

Earnings Consistency

We are searching for EPS numbers that are better than the previous year's. One dip is allowed, but the following year's earnings should be higher than the previous year. CCL’s annual EPS for the last 5 years were 2.47, 2.42, 1.67, 1.39, and 1.59 this type of earnings action is not favorable.

Total Debt/Equity

The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry. CCL’s Total Debt/Equity of 36.97 is above the required maximum, but it is below the industry average of 87.3.

EPS This Quarter VS Same Quarter Last Year

The EPS growth for this quarter relative to the same quarter a year earlier is above the minimum 15% that this model likes to see for a "good" growth company. Stocks with improving earnings are worthy of your extra attention. CCL’s EPS growth for this quarter relative to the same quarter a year earlier is 369%, above our target.

Annual Earnings Growth

This stock valuation model looks for annual earnings growth above 12%, but prefers higher than 20%. CCL’s annual earnings growth rate over the past five years is -1.81%, below our target.

1Tradespoon Score and Outlook: This score conveys Tradespoon’s long-term outlook of 1 to 5 years for a particular stock. Tradespoon uses proprietary methods to rate its trading picks on a scale from 1 to 10, with a 10 being the most favorable expected risk and return outlook. To determine a stock’s rating, Tradespoon uses an advanced algorithm that factors in fundamental and technical analysis to determine a stock's expected risk and return.