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Carnival's Princess Cruises Halt Operation Due to Coronavirus

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Carnival Corporation & Plc’s (CCL - Free Report) Princess Cruises operations has been halted for two months. This will impact voyages departing from March 12 to May 10. Notably, the company was compelled to take the decision following the quarantine of two ships of Princess Cruises line due to the novel coronavirus outbreak.

Jan Swartz, president of Princess Cruises, said “Princess Cruises is a global vacation company that serves more than 50,000 guests daily from 70 countries as part of our diverse business, and it is widely known that we have been managing the implications of COVID-19 on two continents.”

Princess operates 18 cruise ships, which accounts for the company’s more than 20% of the earnings before interest, taxes, deprecations and amortization. Cancellations are impacting the booking trends, which in turn will impact 2020 financial results. The company is providing guests with opportunity to transfer 100% of the money paid for their cancelled cruise to a future cruise of their choice.

Shares of Carnival have plummeted 64.9% in the past month. Other cruise operators like Royal Caribbean Cruises Ltd. (RCL - Free Report) and Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) have also declined 73.2% and 81.6%, respectively, over the same time frame.

Travel Restriction Hurts Cruise Industry

The Cruise Lines International Association has submitted a plan to Vice President Michael Pence suggesting that any person over the age of 70 years shouldn’t be allowed to board a cruise if they fail to provide fitness certificate from doctor. Per Cruise Lines International Association, the average age of passengers on cruises is 47, while 14% are 70 years or above.

The proposal also includes boarding denial to those passengers and crew, who have travelled to Japan and Italy within 14 days prior to embarkation. Meanwhile, President Trump has put restriction on passengers travelling from 26 European countries to the United States. Trump said “We made a lifesaving move with early action on China. Now we must take the same action with Europe.”

While cruise business from China and Asia fell significantly, bookings for the broader business outside Asia has also softened recently thanks to travel restrictions to contain the spread of the contagion.

Zacks Rank & a Key Pick

Carnival currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the leisure space is WW International, Inc. (WW - Free Report) , carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

WW International has an impressive long-term earnings growth rate of 15%.

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