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The Zacks Analyst Blog Highlights: Norwegian Cruise Line, Carnival Corporation & Plc and Royal Caribbean Cruises

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For Immediate Release

Chicago, IL – February 20, 2020 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Norwegian Cruise Line Holdings Ltd. (NCLH), Carnival Corporation & Plc CCL and Royal Caribbean Cruises Ltd. RCL.

Here are highlights from Wednesday’s Analyst Blog:

Is the Coronavirus Throwing Cruise Ship Stocks Overboard?

With the coronavirus threat on the rise, the $45-billion worth Cruise industry has come under significant pressure. The space, which is a key component of the Zacks Leisure and Recreation Services industry, is feeling the heat due to suspension of cruise operations from China.

Cruise business from China constitutes (5% of the total industry) a small but a steadily growing pie of the overall cruise industry. Notably, the outbreak of the COVID-19 virus cancelled a number of voyages in other parts of Asia, which accounts for another 5% of the cruise business.

While cruise business from China and Asia slumped considerably, bookings for the broader business outside Asia softened recently due to travel restrictions to contain the spread of the contagion.

Since this stalemate refuses to relent, industry participants find it hugely difficult to determine the full financial impact on the industry for the current fiscal. However, the epidemic can take a big bite out of the cruise line business this year. The situation can even do greater harm  to business since it is the peak booking season for the cruise liners.

Cruise Stocks Take a Hit

Driven primarily by the coronavirus infection year to date, shares of major cruise operators, namely Norwegian Cruise Line Holdings Ltd., Carnival Corporation & Plc and Royal Caribbean Cruises Ltd. have declined 11.5%, 15.5% and 16.5% each. Moreover, the  industry has declined 6.2% against the S&P 500’s Composite rally of 5%.

Major Operators Slash Earnings Guidance

Royal Caribbean, which sources nearly 6% of its capacity from China, called off 18 voyages in Southeast Asia. This, in turn, is likely to weigh on 2020 earnings results by 65 cents. Management estimates to incur an additional 55 cents  penalty if it was to cancel all the remaining Asian voyages through April

As expected, Carnival is currently unable to ascertain the full financial impact on its fiscal 2020. In the event that  the company has to suspend all its operations in Asia through the end of April, it would hurt its fiscal 2020 financial performance by 55 cents-65 cents per share, which includes guest compensation. Further, the impact on global bookings will affect the company's financial performance.

Other Headwinds

The COVID-19 episode is no stranger  to the cruise industry, which earlier survived norovirus, Zika, SARS, etc. Quick steps, such as quarantining the ships and health scanning are taken by the companies for which, the loss of revenues is certain. But this disruption should be temporal for the industry, which is also grappled with other issues.

The cruise industry’s growth trend in 2020 is likely to ease due to weaker pricing in continental Europe, the US ban on cruise travel to Cuba and volatile fuel prices. Also, regulations from the International Maritime Organization (IMO) pertaining to sulfur emissions at sea, which started this year, are likely to escalate regulatory compliance costs for the related players.

Per the credit rating agency Moody’s in 2020, combined lodging and cruise earnings growth are expected to slow down between 4% and 5%, indicating a decline from its earlier expectations of 6-7% growth.

However, Cruise Lines International Association estimates 32 million passengers to cruise in 2020, suggesting an improvement from 30 million in 2019.

Zacks Industry Rank Indicates Dismal Prospects

The cruise industry is part of the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #178, placing it in the bottom 30% of 255 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates gloomy near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Zacks Rank

Each of the stocks including Royal Caribbean, Carnival Cruise and Norwegian Cruise carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release.