Shares of Carnival (NYSE: CCL) tumbled significantly on Thursday after the cruise line operator lowed its overall targets for the year.
Adding to their already significant problems concerning pollution charges and the damage to their reputation that this has caused, the news that the company is cutting back its expectations for 2019 led to a selloff in the markets.
Carnival said that it earned 66 cents per share on overall revenues of $4.84 billion. In comparison, analysts were expecting 61 cents per share on revenues of $4.49 billion.
Despite exceeding Wall Street’s expectations, which usually lead to a flurry of buying, shares plummeted instead when the company warned they expected the remaining quarters as well as the full year to be below expectations. The company also stated that the government’s sudden ban on Cuba dockings would further hurt their short and medium-term revenue yields.
Earlier in June, Carnival pleaded guilty to charges of carelessly polluting the oceans. Coming to a $20 million settlement with federal prosecutors, Carnival’s cruise ships had continued to act in this manner despite a previous criminal conviction aimed at stopping this exact behavior.
Back in 2016, Carnival was convicted for covering up this pattern of pollution, paying a $40 million fine at the time and was put on a five-year probation. The company also admitted to falsifying compliance documents at the time. Judges have threatened to ban Carnival ships from docking at U.S. ports as well as holding executives individually liable for the violations.
Shares of Carnival tumbled by almost 10 percent on Thursday in response to the news developments, ending the day at $47.26 per share. Shares have been steadily tumbling over the past year amidst environmental pollution scandals, which has led to a number of massive swings in the stock price. Despite this, there are few analysts who have a “sell” rating on the stock, with most either having a “hold” or a “buy” rating on the stock.
One analyst that did downgrade their target for the company was Harry Curtis from Nomura Instinet, who dropped Carnival from a “buy” to a “hold” and his price target from $60 to $52 per share. He goes on to say that Carnival’s “pricing woes are even worse” than he previously anticipated, and that the company’s problems will take longer to fix “than investors are likely to have patience for.”
Instead, Carnival investors are likely to migrate over to its main rivals, Norwegian Cruise Line Holdings (NYSE: NCLH) and Royal Caribbean Cruises (NYSE: RCL), both companies that have been doing better than Carnival overall. Both these stocks tumbled 3 percent on Thursday in light of the Carnival report.
Carnival Company Profile
Carnival is the largest global cruise company, with more than 100 ships on the seas. Its portfolio of brands includes Carnival Cruise Lines, Holland America, Princess Cruises, and Seabourn in North America; P&O Cruises and Cunard Line in the United Kingdom; Aida in Germany; Costa Cruises in Southern Europe; and P&O Cruises in Australia.
Carnival also owns Holland America Princess Alaska Tours in Alaska and the Canadian Yukon. Carnival’s brands attract more than 12.5 million guests annually. – Warrior Trading News