CCL's Free Cash Flow Turnaround Accelerates: How Much Runway Is Left?

Carnival Corporation & plc CCL is entering a new phase of its multiyear recovery, with free cash flow (FCF) becoming an increasingly important part of the company’s operating narrative. After several years focused on liquidity and refinancing actions, Carnival is benefiting from a combination of record profitability, firmer pricing and better cost execution that is strengthening its ability to generate consistent cash. The company’s fiscal third-quarter performance underscored this shift, supported by strong same-ship demand, broad-based pricing gains and continued onboard spending resilience.

For the third quarter of fiscal 2025, Carnival reported record net income of $2 billion, aided by 4.6% same-ship net yield growth, ongoing cost discipline and operational efficiencies such as improved fuel consumption. Refinancing activity completed at favorable rates also contributed to lower interest expense, helping lift quarterly profitability to its highest level in nearly two decades. With no new ship deliveries in 2026, the company expects incremental EBITDA to translate more directly into free cash flow.

Momentum in key commercial indicators adds further support. In the third quarter, customer deposits reached $7.1 billion, reflecting strong advanced bookings. Carnival also noted its longest booking curve on record, with nearly half of 2026 bookings already secured at higher prices. Its destination portfolio, including Celebration Key, is ramping up and expected to support onboard monetization as more itineraries incorporate the new offerings. With EBITDA projected to exceed $7 billion in fiscal 2025, the company is moving toward a more stable FCF profile supported by ongoing cost efficiencies and destination-driven pricing uplift.

Peer Comparisons

In the cruise industry’s race toward stronger free cash flow, Royal Caribbean Cruises Ltd. RCL and Norwegian Cruise Line Holdings Ltd. NCLH remain Carnival’s most direct competitive benchmarks — and both RCL and NCLH are leaning into capacity-driven growth to shape their multiyear cash profiles.

Royal Caribbean continues to post category-leading demand and pricing, with record booked load factors and steady yield gains powered by its expanding destination ecosystem, including Perfect Day and the upcoming Royal Beach Club. RCL is also stepping into 2026 with 6% capacity growth, giving it a structurally larger revenue engine even as new destinations and EU ETS costs weigh on expenses.

Meanwhile, Norwegian Cruise is delivering strong EBITDA performance and double-digit booking momentum, supported by luxury newbuilds and a push into short Caribbean itineraries. NCLH is absorbing heavier dry-dock, marketing and regulatory costs, but management still expects low- to mid-single-digit yield growth and additional margin expansion as more than $300 million of cost savings phases in.

Together, Royal Caribbean and Norwegian Cruise illustrate the competitive backdrop Carnival must navigate — but Carnival’s low-capex 2026 setup gives it a clearer path to converting EBITDA into free cash flow, differentiating its recovery from peers.

CCL’s Price Performance, Valuation & Estimates

Shares of Carnival have declined 16.6% in the past three months compared with the industry’s fall of 12.7%.

CCL Stock’s Three-Month Price Performance

From a valuation standpoint, CCL stock trades at a forward price-to-earnings ratio of 10.91, significantly below the industry’s average of 16.

CCL’s P/E Ratio (Forward 12-Month) vs. Industry

EPS Trend of CCL Stock

The Zacks Consensus Estimate for CCL’s fiscal 2025 and 2026 earnings implies a year-over-year uptick of 52.8% and 10.8%, respectively. The EPS estimates for fiscal 2025 and 2026 have increased in the past 60 days.

CCL stock currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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