Carnival (NYSE:CCL) is anticipated to announce its Q2 earnings on June 24. The cruising behemoth is expected to report earnings of $0.24 per share based on consensus estimates, which is an increase from $0.11 in the same quarter last year. The consensus revenue estimate is $6.2 billion, reflecting an approximate 7.3% growth compared to the previous year. The demand for leisure cruising has remained robust in the aftermath of Covid-19, supported by appealing pricing in contrast to land vacations, alongside a preference for an all-inclusive, packaged travel experience. Carnival’s revenue for the quarter is expected to benefit from increased capacity, heightened onboard revenues, and some price hikes in recent quarters. Carnival has also been dedicated to optimizing its fleet, which has resulted in strong operational performance and profitability.
The company’s current market capitalization stands at $31 billion. Over the last twelve months, revenue was $25 billion, and it has been operationally profitable, reporting $3.8 billion in operating profits and net income of $2.1 billion. Nevertheless, if you are looking for upside with less volatility compared to individual stocks, the Trefis High Quality portfolio offers an alternative — having outperformed the S&P 500 and achieved returns greater than 91% since its inception.
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Carnival’s Historical Odds Of Positive Post-Earnings Return
Here are some insights into one-day (1D) post-earnings returns:
- Over the past five years, there have been 19 earnings data points recorded, with 10 positive and 9 negative one-day (1D) returns observed. In summary, positive 1D returns have occurred approximately 53% of the time.
- However, this percentage falls to 50% when considering data from the last 3 years instead of 5.
- The median of the 10 positive returns is 5.4%, while the median of the 9 negative returns is -2.5%.
Additional data for the 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 lower-risk strategy (although not beneficial if the correlation is weak) is to examine the correlation between short-term and medium-term returns following earnings, identify a pair that exhibits the highest correlation, and execute the corresponding trade. For instance, if 1D and 5D display the highest correlation, a trader can take a “long” position for the next 5 days if the 1D post-earnings return is positive. Below is some correlation data based on both 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and the subsequent 5D returns.
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