Ahead of the Tape: Don't Abandon Carnival's Ship -- WSJ
September 26 2016 - 3:02AM
Dow Jones News
By Steven Russolillo
Carnival Corp. finally had regained steam nicely when Zika
forced a course correction.
Concern that the mosquito-borne disease could hurt tourism have
weighed on the sector in recent months. Shares of Carnival, the
world's largest cruise-ship company, have underperformed the
S&P 500 by some 18 percentage points since early April.
If this proves overblown, investors might have an opportunity,
beginning Monday, when Carnival is expected to release results for
its fiscal third quarter, which runs through August. Analysts
polled by FactSet forecast earnings of $1.88 a share, up 8% from a
year earlier. Revenue is expected to have increased 4% to $5.1
billion.
For one, Carnival was chugging along just fine until the Zika
outbreak. Low fuel costs, higher prices and strong bookings have
underpinned results in recent quarters for Carnival, operator of
Carnival Cruise Line as well as the Princess, Cunard and Holland
America lines.
That also helped burnish the reputation of CEO Arnold Donald,
now more than three years into his tenure. Mr. Donald, the first
boss who isn't part of the founding Arison family, has been a firm
hand on the tiller following reputational issues such as the fatal
Costa Concordia disaster in 2012 and ship fires in recent years. Up
until April, Carnival shares had produced double the return of the
S&P 500 under his leadership, reflecting cruising's popularity
in North America and its potential in Asia.
The big picture hasn't changed in recent months. Naturally, Zika
could grow even more serious, but there has been good news on that
front of late. Florida authorities said last week that they don't
believe mosquitoes are spreading the Zika virus in Miami's Wynwood
neighborhood. And Walt Disney Co. CEO Robert Iger said at a
conference last week that attendance at the Walt Disney World theme
park in Orlando has seen "no impact" from Zika-related
concerns.
Any confirmation from Mr. Donald that Carnival's bookings are
holding up could give the undervalued stock a lift. Shares fetch 12
times projected earnings over the next 12 months, near their lowest
since January 2012 and half the multiple's peak in early 2014.
This is no time to head for the lifeboats.
Write to Steven Russolillo at steven.russolillo@wsj.com
(END) Dow Jones Newswires
September 26, 2016 02:47 ET (06:47 GMT)
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