) is facing one ordeal after another. After the grounding of its
ship Costa Concordia last January in Italy, the engine of its
Triumph cruise ship carrying around 3,000 passengers caught fire
in early February. However, unlike the prior one, there were no
casualties due to the recent disaster.
Carnival expects the voyage disruption and repair costs owing to
the fire disaster in the Caribbean to hurt its first half of 2013
earnings by around 8-10 cents per share. Meanwhile, the stranded
ship has been tugged to the port of Mobile, Ala.
Carnival - the world's largest cruise operator - assured a refund
to the passengers of the vessel along with the transportation
expenses incurred. The company will also offer a future cruise
credit to the passengers on the ship.
Carnival Cruise Lines also cancelled 14 voyages of the Carnival
Triumph through April 13, 2013 following the disaster. Those
guests too will receive a full refund of the fare as well as some
non-fundable charges and as much as a 25% discount on future
Costa Concordia disaster hurt the company's earnings per share by
more than 60 cents in fiscal 2012. More than two years back,
Carnival faced another calamity when a fire broke out in the
engine room of the ship Carnival Splendor, off the coast of
Mexico. The accident hurt fourth quarter 2010 earnings by about 7
cents a share. However, that disaster also was much smaller in
scale and did not put lives at risk.
Carnival as well as other cruise companies like
Royal Caribbean Cruises Ltd.
) is still recovering from the dip in consumer confidence
following Concordia grounding. The recent mishap will act
as an additional drag on the company's reputation as well as
financials. One of the passengers also sued Carnival demanding
As we know, the cruise industry does maximum business in the wave
season between January and March. The recent tragedy could
shatter passenger confidence again especially that of first time
cruisers and result in subdued bookings. The timing of the
catastrophe is bound to take a toll on Carnival's busiest booking
season this year.
Having said that, we think, in due course, Carnival will return
to normality as the recent disaster is much smaller in scale than
the Concordia catastrophe.
Carnival currently retains a Zacks Rank #3 (Hold). Some companies
from the leisure and recreational services industry that are
worth a look include
Carmike Cinemas Inc.
Live Nation Entertainment Inc.
) both carrying a Zacks Rank #2 (Buy).
CARNIVAL CORP (CCL): Free Stock Analysis
CARMIKE CINEMA (CKEC): Free Stock Analysis
LIVE NATION ENT (LYV): Free Stock Analysis
ROYAL CARIBBEAN (RCL): Free Stock Analysis
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