Why Carnival Stock Cruised Forward in June

Carnival (NYSE: CCL) reported smooth sailing in the second quarter, producing results that exceeded expectations and showing significant progress improving its balance sheet.

Investors are climbing aboard, sending shares of the cruise line operator up 21.1% in June, according to data provided by S&P Global Market Intelligence.

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Image source: Carnival.

Strong demand despite economic headwinds

Investors weren't sure what to think about cruise line stocks heading into earnings season. Demand has held up well, but with economists focused on tariffs and uncertainty, there were no guarantees that vacationers would continue to book high-priced cruise adventures.

But there was no sign of cruise fatigue in Carnival's results. The company grew revenue by 9.5% in the quarter and earnings per share by 218%, topping Wall Street expectations. Carnival also ended the quarter with $8.5 billion in customer deposits for future cruises, up 26% from $6.8 billion in the same three months a year ago.

"Our strong results, booked position and outlook are a testament to the success of our ongoing strategy to deliver same-ship, high-margin revenue growth," CEO Josh Weinstein said in a statement. "We continue to set ourselves up well for 2026 and beyond, with so much more potential to take our margins, returns and results even higher over time."

The strong results allowed Carnival to pay down some of the debt the company took on during the pandemic. Carnival prepaid some of its debt scheduled to mature in 2026 and refinanced additional borrowings at lower interest rates, cutting its interest expense and reducing its net debt to 3.7 times earnings before interest, taxes, depreciation, and amortization (EBITDA), down from 4.1 times EBITDA as of February.

Is Carnival stock a buy?

Travel stocks are cyclical, and if history is a guide, demand will weaken over time. If consumers increasingly feel pressed to pay their bills, then big-ticket expenses like vacations tend to be the first things to go, so the macroenvironment is worth watching.

That said, Carnival provided no reason to worry a collapse is imminent. With strong demand trends, an improving balance sheet, and a stock that is still 44% below where it traded prior to the pandemic, it can be full steam ahead for Carnival from here.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.