Stock Picks Overview - Strategists highlight stocks poised for positive returns, focusing on those with strong earnings reports [1] - Two stocks are featured: one in tech (AI play) and one in the cruise line industry [2] Carnival Corporation (CCL) Analysis - Carnival is a Zacks number one ranked stock with an A for VGM, indicating value [3][4] - Stock experienced a dip of over 10% in the past month, potentially creating a buying opportunity [5] - Carnival reported an 83% earnings surprise and has had eight consecutive quarters of record earnings [5][6] - Pre-bookings for the next year are at the same level as last year's record levels, with strong demand seen for 2027 [7] - Carnival offers a variety of cruise lines to meet different price points [8] - Analysts have raised earnings estimates six times for this fiscal year and next year [12] - Earnings are projected to grow 49% this year and 12% next year [13] - The company benefits from lower fuel prices and reduced promotional activity due to strong demand [13][14] - Carnival's valuation includes a forward PE ratio of 13 and a PEG ratio of 06, suggesting both growth and value [14] Micron Technology (MU) Analysis - Micron Technology is a Zacks rank number one strong buy rated stock, benefiting from the AI boom [16] - The stock is up approximately 48% as of the recording and is rebounding after a selloff [17] - BNP Pariba analyst raised the price target by 170% to $270, anticipating a memory super cycle [18] - Fiscal fourth quarter 2025 results showed earnings up 157% year-over-year and revenues up 46% year-over-year [18] - Analysts have been raising estimates for the current quarter and year [20] - The stock is up 125% year-to-date, making it the top-performing chip stock in 2025 [21] - Micron is trading at a forward PE multiple of 1095 times [22]

Core Insights - Carnival Corp. & plc (CCL) has reported another record quarter, with earnings expected to grow by 47.9% this year, indicating strong consumer demand for cruising [1][6]. Financial Performance - Carnival reported earnings of $1.43 for Q3 2025, surpassing the Zacks Consensus estimate of $1.32 by $0.11 [2]. - Revenue reached a record $8.2 billion, an increase of over $250 million from the same quarter last year, marking the 10th consecutive quarter of record revenue [2]. - Gross margin yields increased by 6.4% compared to the previous year [2]. Growth Drivers - Net yields were at an all-time high, 4.6% higher than 2024, driven by strong demand and onboard spending [3]. - The opening of Carnival's exclusive Celebration Key beach destination in the Bahamas is expected to be a growth catalyst for 2026 [3]. Booking Trends - Carnival's booking trends have remained strong, with higher booking volumes than last year and outpacing capacity growth since May [4]. - Nearly half of 2026 has already been booked, aligning with last year's record levels, and historical high prices have been achieved for North America and Europe segments [5]. Guidance and Analyst Sentiment - Carnival raised its net yields guidance for FY2025 to an increase of 5.3% compared to 2024, up 0.3 percentage points from previous guidance [6]. - Analysts have raised earnings estimates for both 2025 and 2026, with the 2025 Zacks Consensus Estimate increasing to $2.10 from $2.00 [6]. Stock Performance - Carnival shares recently reached a new 5-year high but have seen a 10.2% decline over the last 30 days, although they remain up 13.8% year-to-date [9]. - The stock is currently trading at a forward price-to-earnings (P/E) ratio of 13.7, indicating it may be undervalued [12]. - Carnival's PEG ratio stands at 0.6, suggesting a combination of value and growth potential [14].

Core Viewpoint - Carnival Corp. reported strong revenue and earnings for Q3 2025, but the stock experienced a decline post-earnings, raising questions about the market's reaction [1][2][3]. Financial Performance - For Q3 2025, Carnival reported revenue of $8.2 billion, a 3.8% increase from $7.9 billion in Q3 2024, and earnings per share (EPS) of $1.33, up 5.6% from $1.26 [3]. - Consolidated revenue for the quarter was $8.15 billion, exceeding sell-side forecasts of $8.1 billion [3]. Guidance and Future Outlook - The company provided strong guidance updates, indicating robust cruise bookings for 2026 and raising its fiscal year 2025 earnings guidance from $1.97 to $2.14 per share [4]. - Despite the positive outlook, shares fell post-earnings, suggesting investor skepticism or reaction to other factors [4][5]. Debt Offering Context - On the same day as the earnings release, Carnival announced a $1.26 billion debt offering, which initially seemed to trigger the stock's decline [6]. - However, the debt offering is intended to refinance existing higher-yield debt, suggesting a strategic move to lower interest expenses rather than increasing leverage [7][8]. Market Comparison - Carnival's stock trades at a forward P/E ratio of 12, significantly lower than competitor Royal Caribbean's ratio of around 17, indicating potential for valuation improvement [11]. - The reinstatement of dividends by Royal Caribbean contrasts with Carnival's current status, but as Carnival pays down debt, it may also reinstate dividends, enhancing its attractiveness [11][12].

Group 1: Company Overview - Carnival operates as a leisure travel company, providing cruises to approximately 700 ports globally through multiple well-known cruise line brands [2] Group 2: Investment Thesis - Carnival stock is currently trading nearly 11% lower than its 1-year peak and has a price-to-sales (PS) multiple below the average of the last 3 years, indicating it may be undervalued [1] - The company has demonstrated reasonable fundamentals, including a revenue growth rate of 7.1% for the last twelve months (LTM) and an average of 45.9% over the last three years [8] - Carnival maintains a free cash flow margin of approximately 11.1% and an operating margin of 16.4% LTM, suggesting strong cash generation capabilities [8] - The stock trades at a price-to-earnings (PE) multiple of 14.4, which is considered modest given its encouraging fundamentals [8] Group 3: Market Performance and Risks - Carnival has experienced significant market declines in the past, including a 65% drop during the Dot-Com crash and a nearly 69% decline during the Global Financial Crisis [8] - The stock faced an 84% drop due to the Covid pandemic, highlighting its vulnerability to severe market shocks [10] - Despite robust fundamentals, significant sell-offs are inherent risks, as stocks can decline even in favorable market conditions due to events like earnings announcements and business updates [11]

Market Overview - U.S. stock markets have continued to rise in 2025, with major indexes like the Dow, S&P 500, and Nasdaq Composite increasing by 1.9%, 3.5%, and 5.6% respectively in August [1] - The gains are attributed to expectations of further Federal Reserve rate cuts, strong second-quarter earnings, and optimism surrounding artificial intelligence [1][8] Investment Picks - Five stocks with favorable Zacks Rank and momentum for October are Analog Devices Inc. (ADI), Carnival Corp. & plc (CCL), Western Digital Corp. (WDC), DocuSign Inc. (DOCU), and Workday Inc. (WDAY) [2][8] - Each of these stocks has a Zacks Rank 1 (Strong Buy) and a Zacks Momentum Score of A or B [2] Analog Devices Inc. (ADI) - ADI has shown broad-based recovery, margin resilience, and strong free cash flow generation, driven by growth in automation, AI infrastructure, and automotive electrification [5][9] - The company expects a revenue growth rate of 11.8% and an earnings growth rate of 19.4% for the next year [9] Carnival Corp. & plc (CCL) - CCL benefits from resilient travel demand, stronger booking trends, and disciplined cost management, leading to an increase in its full-year 2025 guidance [10][12] - The expected revenue and earnings growth rates for CCL are 6.3% and 47.9% respectively for the current year [12] Western Digital Corp. (WDC) - WDC is experiencing strong demand in the cloud market, with a 36% surge in revenue from this segment, which constitutes 90% of total revenue [13] - The expected revenue growth rate for WDC is -17.8%, while the earnings growth rate is projected at 34.3% for the current year [17] DocuSign Inc. (DOCU) - DOCU's strength lies in its subscription revenues, which have been the majority of its top line, and it continues to grow internationally [18][20] - The expected revenue and earnings growth rates for DOCU are 7.1% and 3.9% respectively for the current year [20] Workday Inc. (WDAY) - WDAY's diversified product portfolio and cloud-based business model are key growth drivers, with significant investments expected to drive innovation [22][24] - The expected revenue and earnings growth rates for WDAY are 12.6% and 21.1% respectively for the current year [24]

Core Insights - Carnival Corporation & plc (CCL) is implementing a significant deleveraging strategy, reducing secured debt by nearly $2.5 billion and refinancing over $11 billion at favorable rates in Q3 FY25, aiming to return to investment-grade credit metrics [1][8] - The company ended Q3 FY25 with a net debt-to-EBITDA ratio of 3.6x, down from 4.3x a year ago, with a target of below 3x by 2026, which has led to a Moody's upgrade and positive outlook [2][8] - Carnival plans to redeem all outstanding convertible notes by year-end, using $500 million in cash and equity, further lowering leverage to 3.5x entering FY26, with expectations of increased free cash flow and reinstating dividends once leverage stabilizes [2][8] Peer Comparisons - Royal Caribbean Cruises Ltd. (RCL) has secured investment-grade ratings and reported liquidity of $7.1 billion, with plans to reduce net leverage to the mid-2x range by the end of 2025, focusing on capital returns and long-term growth [3][4] - Norwegian Cruise Line Holdings Ltd. (NCLH) has reduced net leverage to 5.3x and aims for the mid-4x range by 2026, enhancing liquidity through a 50% expansion of its revolving credit facility [5] Financial Performance - CCL shares have increased by 64.4% over the past six months, outperforming the industry growth of 28.3% [6] - CCL trades at a forward price-to-earnings ratio of 12.51X, significantly below the industry average of 17.58X, indicating potential undervaluation [9] - The Zacks Consensus Estimate for CCL's fiscal 2025 and 2026 earnings suggests a year-over-year increase of 47.9% and 12.9%, respectively, with EPS estimates having risen in the past 60 days [10]

Core Insights - Carnival has experienced significant growth, with shares increasing by 291% over the past three years as of October 6, driven by a resurgence in travel demand post-COVID-19 pandemic [1][3] Financial Performance - In the fiscal 2025 third quarter, Carnival's revenue rose by 3% year over year to $8.2 billion, marking the tenth consecutive quarter of record revenues [3] - The company achieved a record in customer deposits, collecting $7.1 billion in Q3 [3] - Carnival reported record net yields and operating income, indicating strong financial health [3] Market Demand and Growth Potential - There is a robust demand for cruise travel, which is a positive indicator for investors [3] - The cruise industry is attracting younger customers and first-time travelers, suggesting an expanding market opportunity that can sustain long-term demand [5] - Carnival's leadership believes the company offers a compelling value proposition compared to land-based travel options, which could enhance its competitive advantage [4]

Core Viewpoint - Carnival Corporation has demonstrated strong financial performance, achieving record revenues and profits, indicating robust demand for cruises despite concerns over high debt levels and economic uncertainty [2][3][5]. Financial Performance - Carnival reported third-quarter revenue of $8.2 billion, a 3% year-over-year increase, marking the 10th consecutive quarter of record revenue [2]. - The company achieved an all-time high profit of $1.9 billion during the same period [2]. - Carnival has over $25 billion in long-term debt but has refinanced over $11 billion of it this year, benefiting from lower interest rates [3]. Stock Valuation - The stock is currently trading at levels not seen since 2021, yet it remains significantly below pre-pandemic highs, which were often above $50 [4]. - The price-to-earnings ratio stands at 15, dropping to 12 based on forward earnings projections, suggesting the stock is modestly priced relative to profitability [5]. Demand Outlook - Nearly half of Carnival's 2026 bookings are already secured, reflecting strong ongoing demand for cruises [6]. - Cruises are perceived as budget-friendly travel options, which may sustain demand even amid economic challenges [6]. Investment Perspective - Despite the high debt load, Carnival's consistent profitability and record performance suggest a positive trajectory for the company [7]. - The stock is viewed as less risky than in previous years, with attractive pricing potentially supporting continued demand [8]. - The combination of low valuation and improved financial performance makes Carnival a compelling investment opportunity [8].

Core Viewpoint - Carnival (CCL) has been upgraded to a Zacks Rank 1 (Strong Buy), indicating a positive outlook based on rising earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system emphasizes the correlation between changes in earnings estimates and stock price movements, making it a valuable tool for investors [2][4]. - An increase in earnings estimates typically leads to higher fair value calculations by institutional investors, resulting in stock price movements [4]. Recent Performance and Outlook - Carnival's earnings estimates have been revised upward, with a current expectation of $2.10 per share for the fiscal year ending November 2025, showing no year-over-year change [8]. - Over the past three months, the Zacks Consensus Estimate for Carnival has increased by 9%, reflecting a positive trend in earnings outlook [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - Carnival's upgrade to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, indicating strong potential for near-term price appreciation [10].

Core Insights - Carnival Corporation & plc (CCL) reported record-breaking booking volumes in Q3 of fiscal 2025, indicating strong consumer demand for cruising and improved pricing power [1][10] - Nearly half of the 2026 sailings are already booked, significantly higher than the previous year, with elevated pricing levels marking the highest forward-booking position in the company's history [1][10] Booking Performance - Both North American and European brands achieved record-high pricing, reflecting strong demand across Carnival's portfolio [2] - Customer deposits reached a record $7.1 billion in Q3, up over $300 million from the prior year, driven by higher ticket pricing and pre-cruise onboard revenue sales [4] - Booking volumes exceeded expectations, allowing the company to raise full-year guidance for the third time in 2025 [5] New Destination Impact - The opening of Celebration Key, Carnival's new Bahamas destination, has contributed to booking strength, with itineraries commanding a premium on ticket pricing [6] - The company expects 2.8 million guests to visit Celebration Key in 2026, enhancing pricing opportunities and forward visibility [7] Financial Outlook - Carnival enters 2026 with record forward bookings, accelerating pricing, and constrained capacity growth, marking the strongest early reservation pace on record [8] - The company is positioned for continued margin expansion and solid free cash flow generation, supported by sustained onboard spending and balance sheet deleveraging [9] Earnings Estimates - The Zacks Consensus Estimate for Carnival's fiscal 2026 EPS has been revised upward from $2.28 to $2.35 over the past 60 days [11] Stock Performance - CCL stock has gained 46.4% in the past six months, outperforming the Zacks Leisure and Recreation Services industry and the S&P 500 Index [16] - CCL is currently trading at a forward 12-month P/E multiple of 12.43, below the industry average of 17.80, indicating an attractive investment opportunity [19] Investment Consideration - The alignment of strong fundamentals, disciplined execution, and a discounted valuation suggests that CCL stock presents a timely investment opportunity [24]