Carnival (CCL)

Cruise ship company Carnival (NYSE:CCL) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 3.3% year on year to $8.15 billion. Its non-GAAP profit of $1.43 per share was 8.5% above analysts’ consensus estimates.

Company Overview

Boasting outrageous amenities like a planetarium on board its ships, Carnival (NYSE:CCL) is one of the world's largest leisure travel companies and a prominent player in the cruise industry.

Airlines, hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional airlines, hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.

Carnival Corporation (NYSE:CCL) primary competitors include Royal Caribbean (NYSE:RCL), Norwegian Cruise Line (NYSE:NCLH), Disney Cruise Line (owned by Disney, NYSE:DIS), and private companies Viking Cruises and MSC Cruises.

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Carnival’s 20.5% annualized revenue growth over the last five years was solid. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or trend. Carnival’s recent performance shows its demand has slowed as its annualized revenue growth of 14.4% over the last two years was below its five-year trend.

Carnival also discloses its number of passenger cruise days, which reached 27.5 million in the latest quarter. Over the last two years, Carnival’s passenger cruise days averaged 9.4% year-on-year growth. Because this number is lower than its revenue growth during the same period, we can see the company’s monetization has risen.

This quarter, Carnival reported modest year-on-year revenue growth of 3.3% but beat Wall Street’s estimates by 0.5%.

Looking ahead, sell-side analysts expect revenue to grow 4.5% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds.

Carnival’s operating margin has been trending up over the last 12 months and averaged 15.2% over the last two years. Its solid profitability for a consumer discretionary business shows it’s an efficient company that manages its expenses effectively.

This quarter, Carnival generated an operating margin profit margin of 27.9%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Carnival’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q3, Carnival reported adjusted EPS of $1.43, up from $1.27 in the same quarter last year. This print beat analysts’ estimates by 8.5%. Over the next 12 months, Wall Street expects Carnival’s full-year EPS of $2.05 to grow 11%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Carnival has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 10.7% over the last two years, slightly better than the broader consumer discretionary sector.

Carnival’s free cash flow clocked in at $2.03 billion in Q3, equivalent to a 24.9% margin. This result was good as its margin was 17 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.

Over the next year, analysts’ consensus estimates show they’re expecting Carnival’s free cash flow margin of 16% for the last 12 months to remain the same.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Carnival’s five-year average ROIC was negative 2.2%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Carnival’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.

Carnival reported $1.76 billion of cash and $27.86 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $6.93 billion of EBITDA over the last 12 months, we view Carnival’s 3.8× net-debt-to-EBITDA ratio as safe. We also see its $784 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Carnival beat analysts’ EPS expectations this quarter. We were also happy its EBITDA outperformed Wall Street’s estimates. On the other hand, its . Overall, this print had some key positives. The stock remained flat at $30.40 immediately following the results.

Updated: December 3, 2025 at 9:59 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Carnival, you should also grasp the company’s longer-term business quality and valuation.

We cheer for all companies serving everyday consumers, but in the case of Carnival, we’ll be cheering from the sidelines. To kick things off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, Carnival’s number of passenger cruise days has disappointed, and its Forecasted free cash flow margin suggests the company will have more capital to invest or return to shareholders next year.

Carnival’s P/E ratio based on the next 12 months is 10.9x. This valuation multiple is fair, but we don’t have much confidence in the company. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $35.63 on the company (compared to the current share price of $25.98).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.