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Carnival Cruise Analyst Stays Bullish Amid 'Brexit Chaos'

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Carnival Cruise Analyst Stays Bullish Amid 'Brexit Chaos'

Coming off a first-quarter earnings beat Tuesday, Carnival Corp (NYSE: CCL) shares still fell significantly after delivering disappointing second-quarter and FY19 guidance — but one analyst is staying the course on the company.

The Analyst 

Buckingham Research analyst Daniel McKenzie maintained a Buy rating on Carnival and lowered the price target from $68 to $65.

The Thesis

McKenzie said he was looked for an unchanged outlook given strong Caribbean travel demand, but said the source of his error was weaker-than-expected but says the source of his error is tied to weaker than expected European pricing due to "Brexit chaos."

“Our longer-term investment thesis has been tethered to a stronger-for-longer earnings cycle which remains intact, but near-term investors are frustrated with the operators' inability to claw back pricing to offset fuel and FX,” the analyst said in a Wednesday note. 

Although McKenzie said investors are calling into question Carnival’s ability to execute on earnings growth this year, he said earnings in 2019 are growing in the mid-single digits despite an uncertain macro backdrop — and the company expects to return to double-digit earnings growth.

Carnival Cruise shares are off their 52-week high by 24 percent and are unlikely to re-rate higher until the company can execute in the third quarter, McKenzie said: "hence our thesis is pushed out." 

Viking’s widely reported mechanical breakdown is likely not material to CCL, according to Buckingham. 

Price Action

Carnival Corp. shares were down 1.7 percent at $50.83 at the time of publication Wednesday. 

Related Links:

Norwegian Cruise Line's Stock Will Sail Higher, Morgan Stanley Says

Barclays Upgrades Carnival, Says Cruise Lines Are Firm's 'Most Preferred Subsector'

Latest Ratings for CCL

DateFirmActionFromTo
Jul 2019MaintainsHold
Jul 2019DowngradesBuyHold
Jun 2019MaintainsHold

View More Analyst Ratings for CCL
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Posted-In: Analyst Color Earnings News Guidance Price Target Reiteration Travel Analyst Ratings Best of Benzinga

 

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