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Wm. Blair cuts CCL estimates as 'any resemblance of normal sailing keeps getting pushed out'

CRUISE William Blair logo.jpeg
William Blair revised its fiscal 2021 projections for Carnival Corp. to assume an essentially zero-revenue environment through the first quarter, about 25% of ships sailing in Q2 and fairly normal operations in the second half of the fiscal year, at reduced capacity.

'However, visibility remains very murky on this timeline, which could translate into further downward pressure on our below-consensus 2021 projections,' analyst Sharon Zackfia said in a note.

Typically Carnival would be reporting Q4 results at around this time or in the next week.

New projection: $4.21 EPS loss in 2021

William Blair now forecasts a 2021 loss of $4.21 per share, compared to the consensus estimate of a $3.91 loss per share. Its revenue forecast is $7.7bn, compared to the consensus estimate of $8.4bn.

The brokerage estimates also reflect the impact of transactions completed after Carnival Corp.'s last earnings release. These include a $1bn at-the-market offering (67.1m shares at an average price of $14.78) completed Oct. 30 and a $1.5bn ATM offering (94.5m shares at an average price of $15.87) completed Nov. 13. Also taken into account are private offerings of $1.45bn of 7.625% senior unsecured notes and €500m of 7.625% senior unsecured notes, both due 2026, completed Nov. 25 and 10.4m shares at $17.59 per share through a registered direct offering that closed Nov. 23.

Sufficient cash for well over a year with zero revenue

Zackfia said that tollowing the last offering, Carnival had about $10.7bn in cash, sufficient to ensure survival well over a year in a zero-revenue environment.

'Carnival’s stock has increased nearly 50% over the past five weeks as investors anticipate the restart of global sailings in 2021. However, the necessity to raise capital to sustain operations has had a material impact on Carnival’s post-pandemic earnings power, which we estimate at roughly $2 assuming the revenue and operating margin achieved in 2019 — translating into less than half the $4.40 in adjusted EPS Carnival reported in 2019,' Zackfia said,

She added William Blair is encouraged by Carnival’s liquidity and cost containment efforts but reiterated a 'market perform' (hold) rating for the stock with a multiple of roughly 11 times post-pandemic earnings power.

CCL closed at $21.76 on Wednesday. Shares have traded in a range of $7.80 to $51.94 over the last 52 weeks.

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