Financial Trends -- 7/10

EPS inflection is the headline story -- from -$8.46 to +$2.25 adjusted in four years. GAAP diluted EPS went from -$8.46 in FY2021 to $2.02 in FY2025. Adjusted EPS of $2.25 grew +58.5% YoY, driven by revenue growth, margin expansion (EBITDA margins expanded 250+ bps), and a -$406M reduction in interest expense. Diluted shares increased +25% from FY2021 to FY2025 due to pandemic-era dilution, now largely stabilized.

Exceptional deleveraging -- $10B+ debt reduction from pandemic peak, interest expense down -44% from peak. Total debt declined from a pandemic peak of ~$36B to $26.0B (FY26Q1). Interest expense fell from $2,066M (FY2023 peak) to a current run-rate of ~$1,164M annualized. The $19B refinancing program was completed in under one year. Fitch awarded investment-grade rating; S&P is one notch away with a positive outlook. Dividend reinstated at $0.15/quarter; $2.5B buyback authorized under PROPEL.

Revenue growth steady but decelerating; interest expense decline is the major earnings tailwind. Quarterly revenue growth ranged from +3.3% to +9.5% across FY2025, with FY26Q1 at +6.1%. EBITDA growth was stronger (+6.4% to +25.8%) reflecting operating leverage. Interest expense declined every single quarter from $471M (FY24Q1) to $291M (FY26Q1), a -38% reduction over two years. Occupancy plateaued at 102-112% across quarters -- at or near ceiling.

Final Score: 7 / 10. Carnival earns an above-average score reflecting a genuine financial recovery with consistent beats, strong deleveraging, and record bookings extending to 2028. EPS has inflected dramatically from pandemic losses to $2.25 adjusted. However, net yield deceleration from +12.2% to +2.7%, absolute debt of $25.3B (2.5x pre-COVID levels), FY2026 EPS guided slightly below FY2025 due to fuel headwinds, and +25% share dilution from the pandemic era limit the score. Base of 8.0 reduced by -0.5 for high absolute debt and -0.5 for yield deceleration. A score of 8+ would require reacceleration in net yields and continued debt paydown below $20B.

Q1 FY2026 Beat: Beat guidance by $0.03/share driven by yields (+2.7% vs. less than 2% guidance, +100bps beat), costs (5.3% vs. guidance, +50bps beat), and other items. Record Q1 revenues, net yields, operating income, EBITDA, and customer deposits (~$8B, +10% YoY). 85% of FY2026 booked at historically high prices; bookings extend "well into 2028."

PROPEL Plan: Introduced long-term framework targeting ROIC of more than 16% by 2029, EPS growth of more than 50% vs. 2025 (i.e., more than $3.38), and more than 40% of cash from operations returned to shareholders (~$14B). $2.5B buyback authorization announced; dividend expected to grow.

FY2026 Guidance: Full-year yield guidance raised to +2.75% (normalized ~3.25%); cost guidance improved to +3.1%. $500M fuel headwind from geopolitical events partially absorbed by $150M operational improvement. Net income guided above $3.45B (+12% YoY). No material change in cancellation rates despite geopolitical uncertainty.

Q4 FY2025 Records: Record Q4 across all key metrics; FY2025 net income above $3B (+60% YoY), all-time high. Full-year yields +5.5% (beat initial guidance by ~150bps). Unit costs +2.6% (beat initial guidance by ~100bps). Operating margin and EBITDA margin expanded more than 250bps YoY. ROIC above 13%, highest in 19 years. Celebration Key performing in line with expectations on ticket premium, onboard revenue, and fuel savings.

Fuel and Efficiency: Fuel consumption down 4.7% YoY in Q1 FY2026; cumulative savings of ~$650M vs. 2019 levels. $19B refinancing program completed in under one year. Investment-grade leverage (3.4x at FY25Q4) achieved approximately one year ahead of schedule.