Despite posting better-than-expected results for the third quarter, cruise ship operator Carnival (NYSE:CCL) suffered significant red ink. While many of the Q3 line items offered much encouragement, the leadership team offered a muted profit forecast. That had many investors dumping CCL stock, although options traders appear modestly bullish on a net sentiment basis.
According to a report from TheStreet, Carnival posted an adjusted profit of 86 cents per share for the three months ending in August. As well, the cruise ship rang up sales of $6.9 billion, an all-time high. Moreover, this figure represented a 60% lift against the year-ago quarter. Undergirding sentiment was the post-pandemic vacationing boom, colloquially known as “revenge travel.”
Notably, Carnival’s official press release stated that occupancy in Q3 stood at 109%, exceeding the company’s expectations. The figure also symbolizes a return to historical levels. Plus, total customer deposits reached a Q3 record of $6.3 billion, beating the previous Q3 record of $4.9 billion (as of Aug. 31, 2019) by 28%.
If that wasn’t enough, booking volumes continued at significantly elevated levels. Carnival CEO Josh Weinstein stated:
“We are maintaining strong momentum and continuing to build demand through our improved commercial execution. Booking volumes during the quarter were running nearly 20 percent above 2019 levels and multiples of our capacity growth, which has continued into September.”
Since the start of the year, CCL stock has gained about 67%.
CCL Stock Takes a Profit Outlook Hit
While record financial results generally lead to strong share performance, CCL stock failed to receive a post-earnings bump. Instead, it fell sharply, primarily on the profit outlook and also rising concerns about the consumer economy. Nevertheless, major options traders appear relatively bullish on Carnival.
For the fourth quarter, management anticipates adjusted earnings per share to land between a loss of 18 cents to a profit of 10 cents. That wide range clashes with the Refinitiv consensus forecast of 10 cents. Further, the trailing-month loss in CCL stock of about 17% underscores concerns regarding consumer sentiment.
A key component of said sentiment, of course, is rising energy prices. With the price of Brent crude pushing closer to the $100 level, Carnival’s biggest input cost will likely pressure margins. Hence, many investors decided to ignore the past print of CCL stock and focus on its projected canvas, which is less auspicious.
Still, the one bright spot may be found in the derivatives market. According to Fintel’s options flow screener — which focuses exclusively on big block trades likely made by institutions — the biggest trade so far on Friday in terms of premiums involved stemmed from the selling (writing) of put options.
Specifically, traders wrote 1,795 contracts of the Jan 17 ’25 12.50 Put, collecting a premium of $328,185 in the process. Remarkably, Fintel states that this premium represents 2.13 standard deviations from the mean.
At a face-value reading, the put implies a perceived floor in CCL stock at the $12.50 strike price.
Why It Matters
Despite the conflicting dynamics surrounding CCL stock, analysts rate it a consensus strong buy. This assessment breaks down as 10 buys, three holds and zero sells. In addition, the average price target clocks in at $19.77, implying nearly 49% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
