The main line
Shares of Carnival Corp., one of the world’s biggest cruise lines, fell to a three-decade low on Friday after the company reported worse-than-expected earnings – disappointing investors despite its cash flow came back positive for the first time since it resumed sailing. operations during the pandemic.
Morgan Staley has warned that shares of the debt-laden cruise line could fall to $0 at worst … [+]
Key facts
Shares of Carnival fell more than 20% on Friday to $7.02 by 10:10 a.m. ET — hitting their lowest level since 1992 after the company reported a net loss of $770 million for the third quarter and revenue of $4.3 billion — well short of the $4.9 billion analysts were expecting.
The shortfall came even as the company reported its cash flow (as measured by Ebitda) turned positive for the first time since resuming cruise operations — coming in at roughly $300 million, but still less than half of expectations calling for 730 million dollars.
In a statement, CEO Josh Weinstein said the company has seen “significant improvement” in booking volumes that are “now significantly ahead of strong 2019 levels” since announcing relaxed protocols last month, but the company expects cash flow to be flat or even down slightly in the fourth quarter, significantly worse than expectations of $600 million.
Shares of the cruise line, which took on debt to stay afloat during the pandemic, have fallen 66% this year — nearly triple the S&P 500’s 24% drop.
Rival cruise stocks also took a hit after the release: Royal Caribbean fell 10% to less than $40 (down 51% this year), while Norwegian Cruise Line fell 13% (now 46% this year).
Key background
The cruise industry was among the first to be hit by the coronavirus pandemic and has been reeling ever since. The Centers for Disease Control and Prevention issued a no-fly order for the industry in March 2020 that lasted until July. Carnival shares rose after the company posted strong earnings earlier this summer, but the boost was short-lived as analysts began to cut their price targets in light of rising inflation and higher fuel prices. Among the lows, Morgan Stanley warned that in a worst-case scenario, Carnival shares could fall to $0 a share if the economy slips into a recession and the company experiences another “demand shock” similar to the Covid pandemic -19.
tangential
Carnival raised nearly $1.2 billion in a stock offering last quarter, in part to help pay down its massive debt load of more than $34 billion.
Further reading
Carnival shares fall nearly 15% as Morgan Stanley warns of potential stock meltdown (Forbes)
Cruise stocks sink after Carnival announces $1 billion stock sale (Forbes)
