Carnival (CCL) has spent much of 2026 proving that travelers are still willing to spend heavily on cruises. Now, a cost the company has far less control over is threatening to complicate that recovery.
Bank of America Securities analyst Andrew Didora lowered his price target on Carnival to $38 from $42 ahead of the cruise operator’s Sept. 29 third-quarter earnings report, according to a Sept. 24 research note provided to TheStreet.
The reason isn’t weakening demand. It’s fuel.
Brent oil has gained 30% amid increased Middle East tensions, BofA said, describing Carnival as unusually vulnerable as the only unhedged cruise operator among its rivals. The effect on its finances will likely be more apparent in the fourth quarter.
Carnival was already under severe strain earlier this year. The business stated gasoline costs were up roughly 30% in the second quarter, resulting in a $73 million negative effect from fuel and currency. Still, the company announced record quarterly sales of $6.7 billion and record adjusted net profits of $569 million.
That puts investors in a weird scenario ahead of results.
Demand is robust, but one of Carnival’s greatest costs is heading quickly in the wrong direction.
Bank of America sees fuel becoming Carnival’s biggest problem
BofA expects Carnival’s third-quarter results to show that the underlying cruise business remains healthy.
Didora is forecasting third-quarter adjusted profits of $1.35 per share, in accordance with the guidance provided in his report. He also anticipates net yields in constant currency to grow 1.4%, just ahead of the 1.2% projection provided in the paper.
The analyst highlighted robust close-in demand and onboard spending. Combined Bank of America credit- and debit-card spending on cruise lines jumped to the mid-teens year over year in July and August, against a high single-digit increase in May and June.
The developments mirror good operational results from Carnival earlier this year.
Customer deposits hit a record $9 billion in the second quarter, the business said, some $450 million higher than the previous year’s record. Carnival also stated it was 93% booked for 2026 and had less leftover inventory for sale than at this time last year.
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But BofA sees fuel countering that strength.
“Fuel is the primary driver of EPS revisions,” BofA said in its Sept. 24 research note.
Brent had climbed 34% since Carnival’s second-quarter earnings and another 14% during September at the time of BofA’s report.
The bank anticipates just a modest effect on third-quarter profits, given that most of the quarter was already complete before the current hike. Q4 results will be different.
BofA lowered its forecast for EPS in the fourth quarter to $0.20 from $0.27. It also cut its 2027 projection to $2.50 from $2.68 and its 2028 forecast to $2.92 from $3.06.
Carnival’s own past forecast indicates how susceptible its earnings are to fuel costs. The business said in its first-quarter results announcement that a 10% shift in the cost of gasoline per metric ton may impact adjusted net income for the rest of 2026 by around $160 million.
Carnival has been focusing on reducing fuel use on its ships.
Fuel usage per available lower berth day improved 5.6% in the second quarter, the company said. But that efficiency gain could only partly compensate for the giant spike in gasoline costs.
Better operational efficiency and higher commodity prices may be one of the main things investors watch when Carnival reports profits Sept. 29.
Carnival customers are still spending
Fuel might be the biggest risk factor in BofA’s updated projection, but the analyst doesn’t see increasing energy costs as an indication that Carnival’s fundamental business is declining.
That’s essential, since demand has been a major factor driving the cruise industry’s post-pandemic rebound.
BofA’s card data suggests cruise spending strengthened during July and August. Didora also said commentary from companies at a recent BofA conference pointed to steady overall demand.
Carnival’s own second-quarter figures support that take.
The company generated record revenue of $6.7 billion during the quarter ended May 31. Adjusted net income rose more than 20% from the previous year to a record $569 million, while adjusted EBITDA reached a record $1.6 billion.
Carnival also said the booked position for the rest of 2026 was ahead of the prior year at record-high pricing in constant currency. Demand for 2027 and beyond continued to surpass previous-year levels, including higher reservations for future European deployments.
The organization also had the longest booking curve on record.
Those factors help explain BofA’s decision to keep its Buy rating, even while slashing its price goal and earnings estimates.
Carnival seems attractively valued at less than seven times Bank of America’s expected 2027 enterprise value to EBITDA, Didora says. The analyst’s revised price target of $38 is derived by applying a 10x multiple to the firm’s 2027 EBITDA estimate.
On the back of a better fleet mix, normalized earnings power, and continuing deleveraging, BofA says Carnival justifies that price.
It doesn’t address the gasoline issue in the near term, however. BofA sees increasing fuel costs as a negative for Carnival’s earnings prospects, rather than a reason to abandon its larger optimistic thesis.
The distinction will be especially noteworthy when Carnival issues its new outlook.
Investors will be looking for signs of resilient pricing, onboard spending, and bookings to continue to absorb rising expenses without substantially affecting Carnival’s profit trajectory.
The corporation has a bit of a buffer, given its recent success.
Carnival said adjusted cruise expenses excluding fuel per available lower berth day were nearly steady year over year in constant currency, which it credited to improved cost management.
The difficulty is that management has greater immediate influence over many operational costs compared to the price of oil.
Carnival’s falling stock could make buybacks more attractive
Another element of BofA’s view might come into play if Carnival’s shares stay under pressure: stock buybacks.
In March, Carnival launched a $2.5 billion buyback program. The business repurchased around 15.1 million shares in April and May at an average price of $25.85, according to its second-quarter Form 10-Q, leaving about $2.11 billion under the authorization as of the end of May.
Carnival stated in its second-quarter results report that repurchases had exceeded $450 million, including activities beyond the end of the quarter.
Carnival repurchased more than 17 million shares for $450 million in the second quarter and early third quarter, leaving around $2 billion remaining under the authorization, BofA said on Sept. 24.
Didora said he would want to see the business continue to use the authority, with Carnival shares selling significantly below the average prices paid in those prior acquisitions.
It’s not something that’s automatic.
In a filing with the SEC, Carnival said the timing, magnitude, and form of any future repurchases would depend on market circumstances, the price of its shares at the time, and regulatory requirements. There is no expiration date on the program.
Another competitive use of capital is balance-sheet improvement, and Carnival still has a large debt load.
The company’s operational performance has been increasing along with its financial situation.
That leaves management juggling a number of goals, decreasing debt, returning cash to shareholders, and safeguarding earnings as fuel prices climb.
BofA still rates a Buy, believing that the long-term story remains attractive enough.
The issue for Carnival’s Sept. 29 earnings announcement is how much more costly that tale has become.
A cruise operator may encourage guests to book earlier, spend more aboard, and choose premium activities. It can afford to buy more efficient ships and to manage other operational costs.
Stopping Brent crude is not enough. And right now, that’s the variable BofA thinks investors should be paying the most attention to.
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