Record high revenue couldn’t calm the rough waters
Carnival shares sink by 9% following second quarter results
- The cruise ship operator reported revenue of US$4.4bn compared with US$3.94bn in the previous year’s second quarter
- Despite reports of a record second quarter, the share price has moved lower owing to higher costs, adverse currency movements and increased fuel prices
- The Share Centre maintains its ‘buy’ recommendation for medium risk investors seeking a balanced portfolio of income and growth
The world’s largest travel leisure company reported its second quarter results this afternoon, presenting a bit of a mixed bag. While the Florida-based company beat Wall Street expectations and reported record second quarter results, its share price has tumbled in reaction.
Higher fuel prices, adverse currency movements and hurricanes in the key Caribbean market have long worried the cruise company and its investors, culminating in a 9% slump in Monday trading.
Looking ahead, Carnival cut its earnings per share forecast for the year to US$4.15 to US$4.25 from its previous guidance in the range of US$4.20 and US$4.40. The forecast falls below consensus estimates of US$4.36.
The quarter itself produced record revenue and there remains “sustained strength in booking trends” as the group recently delivered its 26th ship, Carnival Horizon. Its brand portfolio includes Princess Cruises, Holland America Line, Seabourn, Cunard, AIDA Cruises, Costa Cruises, P&O Cruises and Fathom, operating approximately 100 cruise ships in total.
The company remains a giant in the sector, serving approximately 5 million guests a year and cruises are one of the fastest-growing parts of the leisure sector, with holiday volumes up 20% over the past year. That trend is quite likely to continue, and as the biggest operator, Carnival is in a strong position to benefit. Despite the slump, we believe this to be temporary and thus maintain our ‘buy’ recommendation.
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