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SunTrust Warns Of 'Broad Based Slowdown' In Cruise Pricing During September

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SunTrust Warns Of 'Broad Based Slowdown' In Cruise Pricing During September
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There is “little to like” in the data revealed by the latest cruise pricing survey, SunTrust Robinson Humphrey’s Patrick Scholes said in a report. He added that there seemed to have been a broad-based slowdown across all global regions.

Ad Pricing Down

Overall industry-wide advertised pricing for future sailings had declined 0.2 percent y/y in September, versus a 4.9 percent rise in August, a 7.9 percent increase in July and a 3.9 percent increase in June.

Carnival Corp (NYSE: CCL) indicated a 1.1 percent increase in advertising pricing for all future sailings, down from the 6.4 percent growth previously noted.

“Looking under-the-hood, we see most brands down sequentially,” Scholes wrote.

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Royal Caribbean Cruises Ltd (NYSE: RCL) pricing dropped to a decline of 1.5 percent, from the previous 5.3 percent growth. Scholes noted, however, that the company had faced a tougher comp in September.

“While the company is modestly more financially levered than CCL, it has minimal near-term capital spending plans ($0.5B in 2017 vs. $2.4B in 2016.) and we see significant share repurchases as a real possibility in 2017,” the analyst mentioned.

Norwegian Cruise Line Holdings Ltd (NASDAQ: NCLH) also saw pricing fall to a negative 1.5 percent, versus 1.3 percent previously. For Norwegian Cruise Line, pricing has decelerated every month since April.

“NCLH’s high-end Prestige brands were especially weak and it appears pricing for Regent Seven Seas took another leg-down, something we believe not contemplated in August earnings guidance,” Scholes stated, while adding that the company has sector-high leverage, which does not bode well if pricing continues to moderate.

Rating And PT Changes

Scholes maintained a Buy rating on Carnival, while reducing the price target from $57 to $54. The EPS estimates for 2017 has been reduced from $3.78 to $3.61, with the net yield estimate going from +2.7 percent to +1.7 percent.

The analyst maintained a Buy rating on Royal Caribbean Cruises, while reducing the price target from $97 to $92. The EPS estimates for 2016 and 2017 have been lowered from $6.06 to $6.00 and from $6.90 to $6.55, respectively.

Scholes downgraded the rating on Norwegian Cruise Line Holdings from Buy to Hold, while reducing the price target from $52 to $43. The EPS estimates for 2016 and 2017 have been reduced from $3.35 to $3.32 and from $3.97 to $3.64, respectively.

Latest Ratings for NCLH

DateFirmActionFromTo
May 2017WedbushUpgradesNeutralOutperform
Dec 2016Goldman SachsInitiates Coverage OnNeutral
Dec 2016Morgan StanleyInitiates Coverage OnEqual-Weight

View More Analyst Ratings for NCLH
View the Latest Analyst Ratings

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