Ahead of the Bell: Carnival

AP News
Posted: Sep 26, 2012 8:13 AM

NEW YORK (AP) — Analysts said Wednesday that Carnival Corp.'s third-quarter results show that while cruise prices remain low, they are stabilizing and the company's cruise bookings continue to rebound from January's Costa Concordia disaster.

On Tuesday, the Miami-based company reported flat third-quarter net income, but its adjusted results beat the company's June guidance, helped by lower-than-expected costs for fuel. In addition, Carnival said that since this summer, booking volumes and pricing through June 2013 have improved, and it is "well positioned" for a rebound in cruise ticket prices next year.

Cruise line operators entered 2012 thinking they could start charging passengers more again after offering widespread discounts following the 2007-2009 recession. But just two weeks into the year, 32 people died when Carnival's Costa Concordia sank off the coast of Italy. Bookings slumped even as cruise companies lowered prices.

Jefferies analyst Ian Rennardson said that while pricing continues to stabilize, it remains lower than a year ago and the company doesn't expect it to turn positive until the second quarter of 2013. He cut his rating for Carnival to "Hold" from "Buy," noting that its shares have risen 40 percent from their lows.

But Rennardson said he still likes Carnival's long-term plans.

"Carnival confirmed that it intends to build only two to three ships a year in the future and return excess cash to shareholders," Rennardson wrote in a note to investors. "We believe that this strategy will be supportive of pricing and improve return on capital employed over the medium to long term."

Meanwhile, Stifel Nicolaus analyst Steven Wieczynski backed his "Buy" rating for the stock, saying that Carnival's booking continue to rebound from the lows they hit after the Costa Concordia tragedy.

"All told, we believe booking patterns continue to build momentum heading into fiscal 2013, setting up current levels as an attractive entry point, in our view, all else being equal," Wieczynski wrote in a note to investors.

Carnival shares rose 57 cents to $37.65 in premarket trading. They hit a 52-week high of $39 during Tuesday's trading. They fell as low as $28.52 in October 2011.