We are downgrading shares of Carnival Corporation (CCL) from Neutral to Underperform. Political disturbances in some geographies and the earthquake in Japan are currently acting as the major hindrance to the company's growth. Moreover, surging fuel prices and a greater exposure to a sluggish European market will be headwinds for the company.
Carnival decreased its projections for net revenue yields from the range of 2.5%-3.5% to 1.5%-2.5% for fiscal 2011 on a constant dollar basis. The company lowered its guidance due to route changes resulting from political disturbances in the Middle East and North Africa (MENA) and the earthquake in Japan.
A greater-than-expected slowdown in the European economies could also threaten the company's profitability, given its increasing exposure to Europe in terms of revenue generation and capacity expansion compared with the industry. Our six-month target price of $33.00 equates to about 13.5x our estimate for 2011.
Be the first to comment