Carnival (CCL)
A solid quarter given high fuel prices. Carnival (CCL) beat its own June guidance on EBITDA margins. Sales hit $8.43 billion, above the roughly $8.38 billion estimate and up about 3.5% from last year's $8.15 billion. Adjusted EPS came in at $1.43, ahead of the $1.35 estimate and flat versus a year ago.
The biggest positive was yields: net yields rose about 2.4%. Fuel consumption climbed about 3.8%. Full-year guidance improved sharply - adjusted net income is now expected around $3.08 billion, and on a constant currency basis about 2.3% higher. The company will pass higher fuel costs to customers, and bookings keep rising to offset the higher expenses from the quarter.
The stock jumped 10%. This followed a strong report from Royal Caribbean (RCL), which is also investing in Sandals and drew heavy analyst support. Norwegian (NCLH) sat in the top 10 on the S&P 500, up 4.5%. Booking occupancy and pricing at record levels are lifting cruise lines across the board.
CarMax (KMX)
The opposite setup from Carnival: while Carnival benefits from record prices, CarMax (KMX) posted a good report built on lower prices. It sacrificed some margin but beat estimates by a wide margin, especially on volume.
Revenue was about $7.8 billion, beating the $7.08 billion consensus by roughly $800 million and up 19.5% year over year. EPS stood out at $1.16 versus the roughly $0.72 consensus, up 81%. Combined unit growth reached 387,000 units, up 14.7%. Comparable used unit growth was 13%.
The quarter's challenge was retail gross margin, pressured by moving inventory at lower prices. Retail gross profit per vehicle was about $2,150, down about $111 from last year. Comparable sales rose 13%. The strategy centers on moving inventory and cutting operating expenses to offset falling vehicle margins. CarMax also raised its share buyback. The stock is recovering well from its May lows.
Netflix (NFLX)
Deutsche Bank (DB) upgraded Netflix (NFLX) from hold to buy, an unusual move because it cut the price target at the same time, from 100 to 95.
Most investors and other analysts, including HSBC and Wells Fargo (WFC), point to weaker U.S. engagement as the main worry. Deutsche Bank instead sees international growth as the primary driver and treats the weaker content engagement numbers as a one- or two-quarter issue that can be fixed. Its view rests on a structural improvement in total viewer volume growth, led by the international side.
The stock has had a rough stretch, falling from a prior high of 134. Over three years it ran from 34 to 134, then pulled back to around 70. The new 95 target sits well above the current level near 70.
