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Carnival Corp (CCL) Well Poised on Initiatives Despite Risks

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On May 19, we issued an updated research report on cruise and vacation company, Carnival CorporationCCL .

Shares of the company have rallied 19.1% over the past year, outpacing the Zacks categorized Leisure & Recreation Services industry's gain of 14.8%.

Opportunities

Carnival is well positioned as the global leader in the cruise industry with solid growth prospects. The company's brand-building efforts and other promotional activities are expected to boost bookings.

Moreover, Carnival's strategy to grow beyond its familiar itineraries and capitalize on new markets bodes well. Its strategy to tap into the fast growing Asian market augurs well as an increasing number of ports and tourist destinations in Asia provide tremendous growth opportunity for the cruise industry.

In fact, the company is concentrating hard on capturing the growth potential of the Chinese market and reinforcing its position in the region through increased capacity. China's cruise market is anticipated to grow manifold and the country is set to become the world's second largest cruise market, after the U.S. Cruises to comparatively untapped markets like Cuba, Bermuda and Mexico are also expected to favor the company.

Furthermore, Carnival continues to launch new ships and add more to its development pipeline. With these new launches, the company aims to formulate measured capacity growth over time that allows its global fleet to meet escalating demand for cruise vacations in every region of the world.

Also, we note that along with focusing on new-builds, Carnival continues to invest in its existing fleets to further enhance guest experiences. The company is expected to launch "Ocean Medallion" on some ships this year, which is a first-of-its-kind wearable device that allows each guest to have a personal digital concierge in order to maximize their experience.

Meanwhile, the company believes it is well positioned for continued earnings growth, given the current strength in its bookings particularly in the Caribbean, Alaska, Europe, Asia and Australia along with pricing trends. In fact, management noted that cumulative advance bookings for the remainder of 2017 are well ahead of the year-ago level at significantly higher prices.

Moreover, the company expects to complete the full roll-out of its yield management system this year, which should aid in driving incremental revenue yields over time.

Concerns

With the major portion of Carnival's revenues coming from Asia and Europe, the company is highly exposed to the impact of negative currency translation. Thus, continual strengthening of the U.S. dollar against the functional currencies of the company's foreign operations is likely to adversely impact the company's results.

Notably, the company also faces competition from other cruise operators including Royal Caribbean Cruises Ltd. RCL and Norwegian Cruise Line Holdings Ltd. NCLH .

Although various strategic initiatives will drive the company's profits over the long haul, costs related to the same are likely to hurt margins in the near term. Further, some macro concerns such as terror assaults in certain regions, Europe's condition post-Brexit, economic slowdown in China and concerns around the Zika virus might adversely impact the company's top line.

Zacks Rank & Stock to Consider

Carnival currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

A better-ranked stock in the industry is The Marcus Corporation MCS carrying a Zacks Rank #1. The company has surpassed earnings estimates in each of the trailing four quarters, recording an average positive surprise of 15.38%.

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Marcus Corporation (The) (MCS): Free Stock Analysis Report

Carnival Corporation (CCL): Free Stock Analysis Report

Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report

Norwegian Cruise Line Holdings Ltd. (NCLH): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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