Carnival (CCL): Is Earnings Season the Time to Buy or Wait?

Carnival Corporation (CCL) has emerged as a standout performer in the post-pandemic travel sector, with its Q3 2025 results underscoring a trajectory of robust growth and disciplined execution. The company reported record net income of $2 billion and adjusted earnings per share (EPS) of $1.43, surpassing Wall Street forecasts by 11 cents and June guidance by 13 cents. Revenue surged to $8.2 billion, marking the 10th consecutive quarter of record revenue. These figures, coupled with a 13% return on invested capital-the highest since 2007-highlight a business that is not only recovering but redefining its pre-pandemic benchmarks.

Strategic Valuation: A Compelling Discount to Future Earnings

Carnival's valuation metrics suggest the stock is trading at a significant discount relative to its forward-looking growth potential. The company's trailing P/E ratio of 13.9x and forward P/E of 11.73–11.81 appear modest, particularly when juxtaposed with its projected 52.8% year-over-year EPS growth for FY 2025. The PEG ratio of 0.52–0.53 further reinforces this narrative, indicating that the stock is undervalued relative to its expected earnings expansion. Meanwhile, the EV/EBITDA ratio of 9.02 sits well below historical averages for the cruise sector, suggesting a favorable entry point for investors seeking exposure to a high-growth, capital-efficient business.

This valuation discount is amplified by Carnival's proactive debt management. The company has refinanced $11 billion in debt since the start of 2025, reducing its net debt to EBITDA ratio to 3.6x, a level that signals strong financial flexibility. With record high customer deposits, Carnival is also insulated from liquidity risks, enabling it to reinvest in yield-enhancing initiatives and capacity expansions without overleveraging.

Forward-Looking Momentum: 2026 Bookings and Pricing Power

The most compelling argument for buying Carnival during earnings season lies in its forward-looking operational momentum. Nearly half of 2026's bookings are already secured at higher prices, a testament to the company's ability to leverage pent-up demand and premium pricing strategies. This trend is supported by a 4.6% year-over-year increase in yields driven by strong close-in demand and elevated onboard spending. Analysts project that these dynamics will translate into a 24.1% to 24.65% upside in the stock price, with a median price target of $35.00 implying a potential 20% return from current levels.

Carnival's cost discipline further amplifies its margin resilience. Unit costs beat guidance by 1.5 points in Q3 2025 a feat achieved through operational efficiencies and strategic sourcing. This margin expansion, combined with a 13% ROIC positions the company to generate outsized returns, even as it navigates near-term challenges such as loyalty program implementation and dry dock costs.

Analyst Consensus and Market Volatility

Despite these fundamentals, Carnival's stock has exhibited post-earnings volatility, declining 5.27% during regular trading after a 6.04% pre-market surge. This volatility reflects broader market skepticism about the sustainability of the cruise sector's recovery. However, analysts remain bullish. A consensus "Strong Buy" rating is backed by a mean price target of $35.43 aligning with the company's raised 2025 guidance, which is $2.14 EPS according to recent reports. UBS and other institutions have highlighted the potential for another earnings beat in Q4 2025 citing strong booking trends and disciplined cost management.

Is Earnings Season the Time to Buy?

For investors with a medium-term horizon, Carnival's earnings season presents a strategic buying opportunity. The stock's valuation metrics, combined with its forward-looking momentum and analyst optimism, suggest that the market is underappreciating the company's ability to sustain high-margin growth. While near-term risks-such as macroeconomic headwinds or operational bottlenecks-exist, Carnival's financial discipline, pricing power, and record deposit base provide a buffer against volatility.

In conclusion, the alignment of undervaluation, strong operational execution, and a clear line of sight to 2026 growth makes Carnival a compelling candidate for accumulation during earnings season. For those who wait, the risk is missing a window where fundamentals are already priced in at a discount to future potential.