Shares of Carnival Corporation sunk below their pandemic lows Friday after the cruise industry leader posted third-quarter earnings revealing higher costs due to inflation, supply chain disruptions and the maintenance of health and safety protocols.
Carnival plunged 23% during the Friday session, knocking about US$2.5 billion off the company's market value. The stock closed at a new 52-week low of US$7.03, below its pandemic plunge lows of April 2020, when shares traded around US$7.80.
The market selloff came after Carnival reported Q3 adjusted net losses of US$770 million on $4.3 billion in revenue. Operating costs and expenses totaled $3.4 billion during the quarter, compared with costs of $1.6 billion in the third quarter 2021. Analysts had expected significantly better results.
"Since announcing the relaxation of our protocols last month, we have seen a meaningful improvement in booking volumes and are now running considerably ahead of strong 2019 levels, Carnival Chief Executive Officer Josh Weinstein said.
The company said revenue increased by nearly 80% in the third quarter of 2022 compared to second quarter 2022 but revenue per passenger cruise day for the third quarter of 2022 decreased compared to a strong pre-pandemic 2019.
The short-term outlook for Carnival remains cloudy. Despite government relaxation of pandemic-era protocols in both the U.S. and Canada, the company is projecting fourth-quarter bookings below 2019 levels - at lower prices. The company says it expects break even to slightly negative adjusted earnings for the fourth quarter ending Nov. 30.
Carnival has been heavily discounting and ramping up advertisements to attract passengers after the long pandemic pause. Carnival says it expects pricing to increase in 2023.
Cruise lines took on massive amounts of debt during the pandemic, and that debt has become more expensive due to rising interest rates. Shares of Norwegian and Royal Caribbean also dropped Friday, by 18% and 13%, respectively.
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