Business

Carnival shares soar after analyst urges investors to buy earnings ahead of time


Shares of Carnival Corp. surged on Monday, after Deutsche Bank analyst Chris Woronka issued a short-term buy recommendation, a week before the yacht operator reported first-quarter financial results.

festival stock
CCL,
+0.70%

rose 2.7% in midday trading, after closing at a two-and-a-half month low on Friday. It outperformed its peers as shares of Norwegian Cruise Line Holdings Ltd.
NCLH,
-1.67%

down 0.7% after news Its chief executive officer has resignedand shares of Royal Caribbean Group
RCL,
-0.86%

up 0.6%.

Woronka reiterated the long-term hold rating he’s had on Carnival for at least the past three years, but said he believes the stock is a “short-term” buy.

“Reporting company” [fiscal first-quarter] premarket results on Monday, March 27 and we believe the report is likely to generate a positive reaction from equities, mainly based on weak sentiment towards the prints, as well as the What we consider to be the low threshold for [Carnival’s] outlook for the rest of [fiscal 2023],” wrote Woronka in a note to clients.

Shares are up 8.9% year-to-date, but are down 28% since closing at an 8-month high of $12.19 on Feb. 7. For comparison, the S&P index 500
SPX,
+0.89%

has grown 2.8% this year, but has fallen 5.2% since February 7.

Woronka said investors may be concerned about the potential for a drop in consumer spending if the economy slows further, but he believes leisure travel should continue to be one of the more flexible sub-sectors. of the larger discretionary consumption sector.

More specifically, he expects cruises to remain “the favorite category,” given how fundamentals have improved into “something more in a potentially football field.” income from fair to adequate” in 2023 from “under income” in 2022.

Carnival reports quarterly-to-February results before the market opens on March 27. The median estimate for analysts surveyed by FactSet is that loss-per-share fell to 60 cents from $1.65. dollars a year ago and revenue increased to $4.32 billion from $1.62 billion.

Wall Street has lowered their expectations for Carnival over the past few months, as FactSet consensus on losses rose from 57 cents a share at the end of December and revenue fell from 3.44 billion dollars.

Skepticism is understandable, as Carnival reported Loss smaller than expected in the fourth quarter, but lost more than in the previous eight quarters, while revenue fell short of analyst forecasts for 11 straight quarters.

Another reason for Woronka’s “catalyst call” is that the recent drop in oil prices will be “disproportionately beneficial” for Carnival, because the company does not hedge its fuel risk. And the future of crude oil
CL00,
+0.12%

has dropped 16.9 percent year-to-date and risks closing Monday at a two-and-a-half year low.

Do not miss: Futures engine: Oil prices extend their decline after their biggest weekly drop of 2023.

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