The cruise industry is working its way back from devastating pandemic shutdowns.
But many of the financial moves made by cruise operators to survive the pandemic have changed the character of the companies.
That was made clear with the latest results from a big player in the industry, Real Money's Johnathan Heller noted recently.
“Carnival (CCL) reported that 75% of its capacity is back in operation,” Heller wrote on Real Money. “That's a huge improvement, especially within an industry that was dead in the water for nearly two years. However, the question is how long it will take to repair the damage done during the pandemic to Carnival's capital structure, measures that kept the company afloat.”
In its earnings report, Carnival reported a loss of $1.66 per share for the quarter, 28 cents worse than consensus estimates.
Revenue hit $1.62 billion -- the largest figure since the first quarter of 2020 -- but missed estimates by $640 million.
The company ended the quarter with cash and short-term investments of $6.9 billion and debt of $34.9 billion, for net debt of $28 billion.
“That's up from $24 billion at the end of the last quarter, when Carnival had $9.1 billion in cash and short-term investments and $33.2 billion in debt on the books,” Heller noted. “In the past quarter, Carnival burned through $2.2 billion in cash and added $1.7 billion in debt.”
At the outset of the pandemic, Carnival had $1.4 billion in cash and $12.9 billion in debt, for net debt of $11.5 billion. Net debt is up $16.5 billion since then.
Issuing debt was not the only way Carnival raised capital during the pandemic, it also issued massive amounts of stock.
“Shares outstanding rose more than 66% over the past two years, from 684 million to 1.137 billion,” Heller added.
“It’s somewhat amazing that the industry survived the pandemic and is showing signs of life,” Heller said. “However, Carnival still appears overpriced, at least to this value investor.”
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