We remain Underperform on cruise operator
), given its mixed second-quarter fiscal 2013 results, successive
slash in guidance, and lingering European crisis.
Why the Reiteration?
Although Carnival's second-quarter fiscal 2013 adjusted earnings
beat the Zacks Consensus Estimate by 50%, its revenues missed the
same. Both earnings per share and revenues slipped year over
year. A lower net revenue yield owing to reduced pricing led to
the decline in revenues, which when combined with higher cruise
costs marred earnings.
Moreover, Carnival is facing one ordeal after another. After the
grounding of its ship, Costa Concordia, in Italy in Jan 2012, the
engine of its Triumph cruise ship caught fire in Feb 2013, which
hurt the company's fiscal 2013 guidance. Even though the
company is recovering at a slow but steady pace from the
Concordia grounding disaster, it continues to be a cause of
concern for the company.
Lower bookings, voyage cancellations and higher costs compelled
Carnival to trim its fiscal 2013 earnings guidance twice in a
span of six months. Earnings for fiscal 2013 are now expected to
remain in the range of $1.45-$1.65 versus $1.80-$2.10 per share
expected earlier (announced in May 2013).
Prior to this, Carnival reduced its earnings guidance from the
range of $2.20−$2.40 to $1.80-$2.10 per share. Consecutive cuts
in earnings guidance within a span of six months raised concerns
about the near-term outlook of the company.
Last but not least, Carnival's European operations will prove to
be challenging even in fiscal 2013 due to the sovereign debt
crisis, which has lowered consumer spending. On the pricing
front, EAA (Europe, Australia & Asia) witnessed softer trends
even before Costa was grounded.
Apart from pricing, overall occupancy and booking volume are
also expected to remain low for European cruises for the rest of
2013. Carnival currently retains a Zacks Rank #5 (strong Sell).
CARNIVAL CORP (CCL): Free Stock Analysis
AMBASSADORS GRP (EPAX): Free Stock Analysis
INTL SPEEDWAY (ISCA): Free Stock Analysis
NORWEGIAN CRUIS (NCLH): Free Stock Analysis
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Others Stocks to Consider
Players in the leisure and recreational industry, which look
attractive at current levels, include
Ambassadors Group Inc.
International Speedway Corp.
Norwegian Cruise Line Holdings Ltd.
), all carrying a Zacks Rank #2 (Buy).