Carnival's Downbeat Earnings Outlook Hurts Industry Stocks

Earnings Report

Carnival Corp (NYSE:CCL) released its second quarter earnings on Thursday before the bell. Its quarterly EPS of $0.66 beat our Zacks Consensus Estimates of $0.61. Reported quarterly revenue of $4.84 billion beating our $4.53 billion estimates by roughly 7%.

The part of the report that really affected CCL stock was its lowered guidance for fiscal 2019. Carnival decreased its fiscal 2019 EPS expectations from $4.35-$4.55 to $4.25-$4.35. The lowered guidance was a result of Carnival cruise cancellations due to necessary ship repairs, and the U.S. government’s policy change on travel to Cuba, which is resulting in lower revenue in the second half of the year. Additionally, revenue was cut due to headwinds for the company’s European brands.

Multiple analysts’ downgraded Carnival, including William Blair who dropped it to “Market Perform” from “Outperform.” Carnival is currently a Zacks Rank #3 (Hold).

Stocks Take a Hit

Although Carnival beat analyst estimates, its stock took a big hit. Following the release, Carnival’s stock opened down more than 9% this morning. Industry peers Royal Caribbean Cruises (NYSE:RCL) and Norwegian Cruise Lines Holdings (NYSE:NCLH) both fell over 3%. The UK brand of Carnival, Carnival UK (NYSE:CUK) , hit a new 52-week low of $45.06 today, also falling over 9%. This is the sixth time in a row Carnival’s stock has fallen following an earnings report.

CCL has fallen over 23% in the past 12 months and the earnings report shows there is little hope for a bounce back in the near future. Royal Caribbean and Norwegian Cruise Lines are expected to report their Q2 earnings in late July and early August, respectively. Their earnings reports could provide a better picture for the industry as a whole as some of Carnival’s lowered guidance was a result of company specific problems.

Bottom Line

Going into the second half of the year, Carnival is not looking good. The industry has underperformed compared to the S&P 500 for the past 6 quarters and Carnival’s pessimistic outlook does not help its stock or its peers’.