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Analysts sharpen Carnival forecasts on Allegra, fuel, FX

Analysts sharpen Carnival forecasts on Allegra, fuel, FX
Wall Street analysts are expecting Carnival Corp. & plc to break even in the first quarter, compared to posting a profit of 19 cents per share a year ago. The company’s implied guidance is a loss of 5 cents to 9 cents per share, down from its initial guidance of a 6-cent to 10-cent per share profit, taking into account 9 cents from the Costa Concordia incident and 6 cents for higher fuel costs.

Thirteen analysts polled by Thomson Financial Network have estimates in a wide range: from a loss of 9 cents per share to a profit of 37 cents. The numbers are in flux.

William Blair & Co. on Tuesday shaved its estimate to a loss of 12 cents per share, down from its prior expectation of a loss of 6 cents per share. The reduction reflects the brokerage’s projection of an incremental 6-cent to 7-cent penalty from the Costa Allegra fire.

Analyst Sharon Zackfia thinks net cruise costs, excluding fuel, will shoot up 8%, above Carnival’s guidance of an increase of 2.5% to 3.5%, reflecting costs for both Concordia and Allegra. Apart from the costs, she expects modest impact from Concordia in the first quarter, since most inventory would have been sold prior to the Jan. 13 capsize.

William Blair expects that when Carnival reports Q1 results on Friday it will lower full-year net yield guidance of an increase of 1% to 2% in constant currency to roughly flat to negative.

Zackfia sees a worst-case scenario as constant-currency net yields in the negative mid-single digits, with ‘Costa as the real wild card as it remains difficult to ascertain just how bad bookings remain’ at the brand that comprises about 15% of Carnival’s capacity.

The brokerage lowered its net yield projection to -1% to -2% for the year and the second quarter, and -4% to -5% in the third quarter. Factoring in an 11-cent penalty from higher fuel costs, offset by a 2-cent currency benefit, William Blair now projects Carnival will earn $1.66 per share in 2012, compared to the consensus estimate of $2.17 and the company’s $2.42 profit in 2011.

Zackfia views CCL shares, currently selling at 18 times William Blair’s 2012 estimate, as ‘attractively priced for investors with longer-term horizons’ while recognizing the potential for further downward earnings revisions in the near term. The brokerage rates the stock ‘outperform.’

UBS Investment Research also told investors it expects little surprise Concordia impact in Q1 beyond what’s already known, and analyst Robin Farley views the fact the company moved its February quarter reporting forward ‘as a sign the company wants to be able to talk more freely about the impact it expects from the Concordia accident.’

Farley thinks that Carnival quantifying the impact will help the stock by putting a floor on investor concerns.

UBS expects CCL to post an 8-cent loss in the first quarter, in line with implied guidance. Citing a recent negative impact from foreign exchange as the dollar recently strengthened, the brokerage cut 6 cents from its 2012 EPS forecast, which goes to $1.89.

Ahead of Friday’s Carnival update, Farley noted that a 1% change in constant currency net yield equates to an impact of about 17 cents to the company’s 2012 earnings per share.

While Concordia will likely impact net yield in 2012, UBS projects recovery in 2013 on top of its +2% projection due to organic capacity growth. ‘We have seen strong recovery leading to above-average yield growth after previous shocks to travel demand like post-9/11,’ Farley said in a note, adding that UBS projects 3.5% net yield growth for Carnival in 2013.

UBS rates CCL ‘buy’ but lowered its price target to $34 from $35 to account for the strengthening dollar last week.

Carnival shares opened at $29.82 on Wednesday.