Carnival (NYSE:CCL) is expected to publish its Q2 earnings on June 24. The cruising giant is likely to report earnings of $0.24 per share per consensus estimates, up from $0.11 in the year-ago quarter. The consensus estimate for revenues stands at $6.2 billion, up about 7.3% compared to the last year. Demand for leisure cruising has held up well following Covid-19, given the attractive pricing compared to land vacations, as well as a desire for an all-inclusive, packaged travel experience. Carnival’s revenue for the quarter should benefit from higher capacity, higher on board revenues, as well as some price increases in recent quarters. Carnival has also been focusing on optimizing its fleet, and this has translated into a strong operating performance and profitability.
The company has $31 billion in current market capitalization. Revenue over the last twelve months was $25 billion, and it was operationally profitable, with $3.8 billion in operating profits and net income of $2.1 billion. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
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Carnival’s Historical Odds Of Positive Post-Earnings Return
Some observations on one-day (1D) post-earnings returns:
- There are 19 earnings data points recorded over the last five years, with 10 positive and 9 negative one-day (1D) returns observed. In summary, positive 1D returns were seen about 53% of the time.
- However, this percentage decreases to 50% if we consider data for the last 3 years instead of 5.
- Median of the 10 positive returns = 5.4%, and median of the 9 negative returns = -2.5%
Additional data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky strategy (though not useful if the correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has the highest correlation, and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves “long” for the next 5 days if 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
