Skip to main content

Market Overview

Bernstein On Cruise Lines: Taking Stock Of Oil Risk

Share:
Bernstein On Cruise Lines: Taking Stock Of Oil Risk

Contrary to recent concerns, Cruise lines appear well-positioned to withstand a moderate increase in oil prices in the near term, and the greater risk seems to be increased share price volatility caused by “oil-related headlines or a sustained increase in oil prices in the absence of a stronger economy,” Bernstein’s David Beckel said in a report.

Concerns around rising oil prices have rarely emerged for the sector, despite oil being close to record low prices for most of 2016, Beckel noted.

Cruise Lines Can Weather Oil Price Increases

The OPEC (Organization of the Petroleum Exporting Countries)'s decision announced on November 30 signaled “a renewed willingness among OPEC nations to collaborate,” suggesting a greater risk of oil price hikes going forward.

Beckel mentioned, however, rising oil prices would likely have only a “muted” impact on the results of cruise lines. He mentioned three reasons for this:

  1. Cruise lines actively hedge out fuel exposure.
  2. Fuel and forex tend to be negatively correlated over time.
  3. Rising oil prices may be accompanied by a strengthening economy.

The analyst estimated that an oil price increase of $5 per barrel would result in only a low- to mid-single-digit decline in EPS, “due primarily to the heavily hedged fuel exposures among the Cruiselines.” He added, however, that constant news flow regarding the risk of higher oil prices could cause share price volatility.

Beckel maintains Outperform ratings on Royal Caribbean Cruises Ltd (NYSE: RCL) and Carnival Corp (NYSE: CCL), with price targets of $102 and $63, respectively. He has a Market-Perform rating and a price target of $43 on Norwegian Cruise Line Holdings Ltd (NASDAQ: NCLH).

Latest Ratings for RCL

DateFirmActionFromTo
Mar 2021UBSMaintainsBuy
Mar 2021JP MorganMaintainsOverweight
Feb 2021JP MorganMaintainsOverweight

View More Analyst Ratings for RCL
View the Latest Analyst Ratings

 

Related Articles (CCL + RCL)

View Comments and Join the Discussion!

Posted-In: Analyst Color Long Ideas Commodities Reiteration Travel Markets Analyst Ratings Movers Best of Benzinga

Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com