Carnival keeps beating its guide, but fuel has left the year's EPS goal $0.24 below December's

The year's guide sits below December's, and fuel is the gap

Carnival has beaten its quarterly earnings guidance again and again, and it will still earn less this year than it told owners in December 2025. That month the company stated adjusted earnings per share of about $2.48 for the fiscal year. Its latest guide, on 29 September 2026, is $2.24. The shortfall is not a mystery. By our arithmetic, it is fuel.

Walk through the year. In March a fuel price shock took thirty-eight cents and better operations gave back eleven. In June the company cut its yield, the price it earns per passenger berth, offset it with cost savings, and still nudged the guide up a cent. By September fuel had taken eleven more and operations and buybacks had added thirteen. Fuel cost forty-nine cents in all; operations and buybacks restored twenty-five. The company does not hedge, and its chief executive called hedging "a short-term band-aid that sometimes pays off, sometimes it doesn't".

Operations ran ahead of plan, but operating profit fell

The business is doing better than the company said it would. Adjusted net income for the quarter that ended in August was $1,963 million against its adjusted net income guidance from June. The company has beaten its prior guidance on each of the last five calls at least, though the beats have shrunk since last year.

Operating profit tells a different story. It fell 2.2%, and the margin shrank from a year ago, as the exhibit below shows. Fuel explains it: the fuel bill rose by more than the whole fall in operating income.

The headline net income came from elsewhere: lower interest and a smaller charge for retiring debt early. Adjusted earnings per share did not move from a year ago.

Cash went to buybacks as the leverage goal went quiet

In December 2025 the company said net debt would fall below three times annual EBITDA (operating profit before depreciation) by the end of the fiscal year. In March 2026 it set a longer-run target of 2.75 times as part of its PROPEL plan. In June it reported a ratio just above three. On the September call it gave no ratio. The chief financial officer said, on leverage, "we expect year-over-year improvement in our balance sheet and leverage metrics"; he added that total debt is now below $24 billion.

The balance sheet may be why. Net debt, debt less cash, was no lower than three months earlier. It is still about $2.0 billion lower than at 30 November 2025, the end of last fiscal year, by our arithmetic. By our arithmetic, getting under three times by year-end would take a fall of more than a billion dollars in the last quarter alone, when that quarter's guided EBITDA is about the same size and capital spending is heavy. That is our reading, not the company's.

The cash went to holders instead. Last quarter, buybacks and dividends took more than the cash left after capital spending, by our arithmetic.

What would have to be true, and what we do not know yet

The company's plan, set out in March, is earnings per share more than half again above 2025's by 2029. From the latest guide that needs at least about 14.6% a year, by our arithmetic. It needs fuel to behave, and the guide for the fourth quarter assumes dearer fuel than last quarter's. It needs yield to outgrow costs, which are guided up 2.2% reported this year. And it needs early 2027 to recover.

That is the open question. Management said spring's booking disruption carried into the first quarter of the next fiscal year, then declined three times to give 2027 yield, a first-quarter exit rate or a starting yield-cost spread, saying it will talk more in December. Notice what was headlined: the improvement in operations since June, rather than a guide below December's. Buybacks added a cent to the guide in June and again in September. We do not know next year's yield, costs or capital spending, or whether debt gets under three times, until the December call.

In each of the last five calls Carnival cleared its earnings bar. The debt mark it set for this year-end is the one it has stopped mentioning.