Carnival shares rise 5% on 2 November after oil falls on U.S.-Iran talk hopes

Fuel is among a cruise line's largest operating costs, and Carnival does not hedge fuel, so cheaper oil can lift profit expectations and reach its cost line more directly than at rivals that do hedge, 24/7 Wall St reported.

Oil move lifts cruise stocks

Oil prices dropped more than 4% on 2 November on hopes for U.S.-Iran talks. Carnival traded at $30.26, up 5%, in the afternoon. Royal Caribbean rose 5% to $321.77 and Norwegian gained 4% to $18.28, 24/7 Wall St reported. Royal Caribbean's hedges cover 58% of its fourth-quarter 2026 fuel consumption. Norwegian's third-quarter fuel price net of hedges rose to $819 a metric ton from $744.

CEO Josh Weinstein had flagged fuel sensitivity on the 29 September earnings call: "If fuel would cooperate, that would make it a lot easier. But clearly, we can't count on that." 24/7 Wall St noted that if the U.S.-Iran talks stall, oil could rebound and Carnival's unhedged position would work against it.

Record quarter behind the rally

Carnival reported third-quarter results on 29 September for the period ended 31 August. Revenue rose 3.5% to $8.44bn, above the $8.39bn consensus. Adjusted EPS was $1.43 against $1.35 expected. GAAP diluted EPS rose to $1.40 from $1.33. Net income was $1.9bn and adjusted net income $2.0bn. It was the seventh consecutive quarterly earnings beat, IBTimes reported.

Adjusted EBITDA was about $3.0bn, matching the prior-year record and $110m above June guidance. Constant-currency net yields rose 2.4%, more than a percentage point above guidance. Adjusted cruise costs excluding fuel per available lower berth day rose 1.8% in constant currency, a point better than guidance. Occupancy was 111.8% and the company carried about 3.9m passengers.

The quarter absorbed a $131m unfavorable impact from fuel prices and currency, or $0.10 a share. Fuel consumption per available lower berth day improved 3.8%. Gross margin yield fell 1.3% from a year earlier, GuruFocus reported.

Bookings, guidance and debt

Customer deposits reached a third-quarter record of $7.6bn, up nearly 7% from the prior-year record and about $500m above it, despite roughly flat capacity. Carnival said 2027 is already half booked with occupancy and pricing at record levels, and that 2028 bookings are ahead of the prior year.

For fiscal 2026, Carnival raised adjusted EPS guidance to about $2.24 from $2.22, slightly above the $2.21 consensus, GuruFocus reported. It expects adjusted net income of about $3.08bn and adjusted EBITDA of about $7.14bn. The company raised its operational outlook by more than $150m versus June guidance, despite a $150m fuel-price impact. Full-year constant-currency net yields are guided up about 2.3%. For the fourth quarter, Carnival expects net yields up about 1.7% and adjusted EPS of about $0.20, below the $0.24 consensus.

Carnival said total debt is below $24bn, down from a 2023 high of $36bn. During the quarter it redeemed $500m of 7% notes and S&P restored its investment-grade rating. The company has repurchased about $1.2bn of shares this year.

The shares had closed at $25.11 on 29 September, up 13.4%, after the results, Yahoo Finance reported. The 2 November gain left them up 0.7% for the year to date.