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Cruise Shares Rise After Carnival Posts Modest Profit

Dec 21, 2013 8:00 am

Skift Take

As Carnival goes, so goes the cruise industry in the U.S., or so it seems. Carnival’s fourth quarter profit, even though it was smaller than in Q4 2012, boosted other cruise lines’ stocks. The other day Carnival reported that even its own advertising seemed to be help rival cruise lines. Go figure.

— Dennis Schaal

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 / Carnival Cruise Lines

A Carnival cruise ship, Carnival Triumph, is seen in this undated handout picture provided by Carnival Cruise Lines to Reuters on February 10, 2013. / Carnival Cruise Lines

The cruise ship sector got a lift Friday after Carnival reported a small but surprising fourth-quarter profit.

The Miami company is beginning to win back passengers after two rough years, with the Costa Concordia running aground near Italy in 2012, and mechanical problems and fires on other ships earlier this year.

Carnival Corp. was upgraded by UBS and Credit Suisse. UBS also upgraded Royal Caribbean, though analyst Robin Farley said her top pick remains Norwegian Cruise Line.

Farley boosted Carnival to a “Buy” from “Neutral,” citing improved confidence in the company. She said that the company’s pricing strategy is working. Farley anticipates Carnival will be able to recover from its image issues and expects gains in 2015. The price target on the company’s stock went to $2.54, from $2.42.

Carnival still had a 29 percent drop in profit, but its adjusted results came in ahead of market forecasts. Its revenue increased 2 percent, also beating expectations. The quarter’s results were helped by “accelerated progress in Carnival Cruise Lines’ brand recovery,” according to company president and CEO Arnold Donald.

The company said booking volumes are up, although at lower prices.

Carnival anticipates an adjusted first-quarter loss of 7 cents to 11 cents per share. Analysts had been expecting a loss of 7 cents per share, according to FactSet.

Carnival’s shares rose 55 cents to $38.60 by late afternoon, slightly outpacing broader market gains.

The news cheered investor enthusiasm for other cruise lines as well, given that bad headlines had put a damper on the industry.

Royal Caribbean Cruise Ltd. shares increased 85 cent to $46.76. Norwegian Cruise Line Holding Ltd. shares increased nearly 4 percent to $34.44, with its gains proving much bigger than the rest of the market.

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