Is Carnival Cruisin’ for a Bruisin’?

As the June quarter approaches its end, earnings reports tail off until the second week of July, when the country’s big banks kick off the new earnings season. Here is a look at what happened on Wednesday and what’s ahead for Monday.

After markets closed Wednesday, KB Home beat analysts’ estimates on both the top and bottom lines. Year over year, revenue increased by 2.6%, and earnings per share (EPS) rose by almost a third sequentially. The homebuilder also raised full-year revenue guidance. However, the average selling price for the May quarter fell by 3%, and gross margin fell by 3.9% due to price cuts, buyer incentives, higher construction costs and changes in the sales mix. Shares traded down 2.4% shortly after Thursday’s opening bell.

Before U.S. markets opened on Thursday, Accenture also reported EPS and revenue that beat analysts’ expectations. The IT services firm also issued in-line guidance. Yet, bookings for the current quarter were soft, and the midpoint of the current quarter’s guidance range was below Wall Street estimates. Shares traded down 2.7%.

Darden Restaurants posted better than expected EPS and revenue that was really close, but still below, the consensus estimate. Guidance was in line with expectations, and the owner of Olive Garden and other restaurant brands raised its quarterly dividend by 8%. The stock traded down 3.3% Thursday morning, likely due more to the overall market mood than anything the Darden said or did.

Gunmaker Smith & Wesson and CarMax, the used car dealer, are on deck to report results after markets close Thursday and before they open on Friday, respectively.

There are no earnings reports due out Friday afternoon, and only one of note is expected before U.S. markets open on Monday. That is from Carnival Corp. & PLC (NYSE: CCL).

Since reporting first-quarter earnings in late March, shares of the cruise ship operator have soared by more than 80%. Carnival reported positive operating cash flow of $388 million in the first quarter, along with negative free cash flow of $3.36 billion. Total debt amounts to about $36.5 billion, and net debt totals $31 billion. Pent-up demand only lasts until it is fulfilled. And while revenue is forecast to come in much higher than a year ago, risk abounds in the market for discretionary spending on cruise vacations.

Analysts remain barely optimistic on the stock, with 11 of 20 analysts having a Buy or Strong Buy rating and another six rating it at Hold. At a recent price of around $15.90, shares have outrun their median price target of $12.50. At the high target of $22.00, the upside potential is 38.4%.

For the company’s second quarter of fiscal 2023, analysts have forecast revenue of $4.77 billion, which would be up 7.8% sequentially and by 99.0% year over year. The company reported revenue of $2.4 billion in the same period a year ago. The adjusted loss per share is forecast at $0.34, better than the prior quarter’s loss per share of $0.55 and much better than last year’s quarterly loss of $1.64 per share.

For the full fiscal year that ends in November, Carnival is expected to post a per-share loss of just $0.25, compared with last year’s loss of $4.67 per share. Revenue is forecast to reach $21.01 billion, up 72.7% year over year. Carnival posted revenue of $12.17 billion in fiscal year 2022.

Carnival is expected to post earnings of $0.84 in the 2024 fiscal year, yielding a price multiple of 18.7, and $1.27 in fiscal 2025, for a multiple of 12.4. The stock’s 52-week trading range is $6.11 to $16.40. The company does not pay a dividend. Total shareholder return for the past year is 63.95%.

Originally published at 24/7 Wall St.

By Paul Ausick