Bearish stock to watch: Carnival Corp (NYSE: CCL)

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Carnival Corp (NYSE: CCL) stock lost over 8.4% on 26th September, 2019 (As of 12:46 pm GMT-4; Source: Google finance) as the company has cut its 2019 profit forecast for the third time as it anticipates that it will be affected from higher fuel prices. Fuel, which is a major part of cruise operators’ operating costs, accounted for about 11.4% of Carnival’s total operating expense in its third quarter ended Aug. 31. Oil prices have risen recently following attacks on Saudi Arabia’s biggest oil facility that has triggered geopolitical tensions in the Middle East. The company expects a hit of 8 cents per share from the recent spike in fuel prices. Carnival had lowered its outlook in June, due to the abrupt Cuba travel ban and weakening demand in Europe. For its current quarter, Carnival said weather disruptions, a ship delivery delay and the travel ban to Cuba are anticipated to have a financial impact of about 7 to 9 cents a share.

Moreover, CCL has also made close-in deployment changes, including those made to address the recent situation in the Arabian Gulf, which has had an impact on recent booking trends and ticket prices.

CCL in the third quarter of FY 19 has reported the adjusted earnings per share of $2.63, beating the analysts’ estimates for the adjusted earnings per share of $2.53. The company had reported the adjusted revenue growth of 12 percent to $6.53 billion in the third quarter of FY 19, beating the analysts’ estimates for revenue of $6.17 billion,  according to IBES data from Refinitiv.

For the fourth quarter, the adjusted earnings per share are expected to be in the range of $0.46 to $0.50 versus 2018 adjusted earnings per share of $0.70.

CCL now expects adjusted earnings of $4.23 to $4.27 per share in 2019, down from its earlier forecast of $4.25 to $4.35 per share. The forecast has overshadowed the cruise operator’s better-than-expected quarterly sales and profit.

For its 2020 fiscal year, the company expects its capacity to grow about 7% and the fuel expenses are expected to be $1.8 billion, compared with the $1.6 billion it projects for 2019. In fiscal 2020 the company will increase its usage of MGO as a percent of total fuel consumption due to the IMO sulfur emission regulations. MGO is currently expected to represent about 40 percent of fuel consumption for full year 2020 compared to approximately 20 percent for full year 2019.


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