UBS cuts CCL price target from $23 to $12 on fuel, interest

The brokerage's estimate for yield recovery in 2023 remains unchanged.

About $8 of the change related to fuel cost and about $2 to interest expense. UBS's fuel expense revision has a 56-cent impact on CCL’s estimated 2023 earnings per share, accounting for $8-9/share, while higher interest expense lowers estimated 2023 EPS by roughly 10 cents, driving $1-2/share of lower price target.

Volatile fuel prices

UBS noted oil prices remain highly volatile.

The brokerage's 2023 EPS estimate for CCL went to 79 cents from $1.47, while its 2022 estimate went to a loss of $3.50 per share from a loss of $2.22/share. These numbers compare to the Wall Street consensus expectation for a 2023 profit of 86 cents per share and a 2022 loss of $3.61/share.

UBS analyst Robin Farley estimates that for every 10% change in fuel price year over year, there would be a 26-cent impact to her 2023 EPS estimate for CCL. Updating for today's fuel price versus when CCL, Royal Caribbean Group and Norwegian Cruise Line Holdings last reported earnings would positively impact EPS by about 17 cents for RCL and about 20 cents for CCL and have no impact on NCLH.

'Buy' rating affirmed

UBS reiterated its 'buy' rating for Carnival.

CCL closed at $9.33 on Thursday and was down more than 3% in trading Friday afternoon. Shares have traded in a range of $8.10 and $27.39 over the last 52 weeks.