Carnival Reports Friday With Margins Under Pressure From Surging Fuel Costs
Carnival Reports Friday With Margins Under Pressure From Surging Fuel Costs
Carnival reports Q1 earnings on Friday, with analysts expecting $0.18 EPS on $6.14 billion in revenue.
The stock has dropped hard since the Iran war began, with increased fuel costs expected to eat into Carnival’s margins.
Options on the stock show an expected move of +/- 1.49 points, or 5.9% of Thursday’s stock price.
Carnival to report earnings on Friday, March 27, as the broader market drops on war fears
Carnival Corporation (CCL) is scheduled to report first quarter earnings on Friday, March 27, before the market open.
The cruise operator’s stock price fell sharply recently, as surging oil prices pressured the outlook for its margins since fuel costs are a significant input cost for its business.
Chief Executive Officer Josh Weinstein has managed to turn the company around since 2022 by streamlining its fleet operations and reorganizing its corporate structure.
Since October 2022, the stock has increased by over 400% up until February. However, since the start of the war with Iran, its stock has dropped nearly 25% as surging fuel costs threaten its bottom line.
Booking volumes will also be central to how investors interpret the strength of the company moving forward. With higher oil prices and inflation expected to increase due to the war, consumer spending on vacations could reflect some hesitancy. One specific warning sign could be seen through this lens by analyzing cancellations, which should be discussed during the earnings call.
What do investors expect
According to TradingView, investors expect Carnival’s earnings per share (EPS) to cross the wires at $0.18 and revenue of $6.14 billion. That would compare to an EPS of $0.13 on $5.81 billion in revenue a year ago.
Last quarter, Carnival missed on its revenue expectation, posting $6.33 billion versus an expected $6.37 billion. EPS beat at $0.34 versus an expected $0.25. Over the past year, Carnival has managed to beat EPS and revenue expectations in all quarters besides last quarter’s revenue.
Trading Carnival earnings
Carnival traded with an implied volatility rank (IVR) of 60.2 on Thursday, March 26. That means volatility compared to the past twelve months is modestly elevated. Of course, some of that can be attributed to market-wide volatility driven by the Iran war.
Options on the stock show an expected move of +/- 1.49 points, or 5.9% of Thursday’s 25.26 stock price.
The recent low in the stock traded at 23.47, which could offer traders a level to defend if the stock moves to the downside on a negative earnings report. Still, that level is just outside the expected move, so a potential trade of selling a put spread just below the recent low could offer a viable way to make a short volatility play on earnings.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
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