Rocky Seas as Carnival Cuts Forecast

Carnival has been discounting prices to lure customers, forcing the cruise operator to cut forecasts, as it faces problems with two more cruise ships. Fred Katayama reports.

Published

2 months ago

Categories

Finance, Lifestyle

Topics

Markets, Travel & Tourism

Places

United States of America, Italy, Mississippi, Gulf Of Mexico

Companies

Carnival Corporation, Morningstar, Inc.

Transcript

It's enough to get a Carnival shareholder seasick. The world's largest cruise operator warns of lower revenue and earnings amid a string of horrific mishaps at sea - two this week alone. Carnival says its net revenue yields will be flat this year instead of the 1 to 2 percent increase it had expected. It has been offering discounts to lure customers, especially in Europe. Morningstar analyst Jaime Katz: SOUNDBITE: JAIME KATZ, EQUITY ANALYST, MORNINGSTAR (ENGLISH) SAYING: "The outlook was a little bit disappointing obviously. Both yields and costs were taken down or taken further worse. So yields were taken down and costs were increased over the remainder of the year to improve ship security, or security measures and for the takeout of the Triumph, out of its voyages." The news hit the stock hard, pushing it down as much as six percent. The bad headlines keep coming for Carnival. Today, the company said technical issues forced it to cancel a scheduled stop for its Legend ship. The day before, the Carnival Dream became a nightmare for passengers as it lost power and a toilet overflowed. Over the weekend, a mechanical problem struck the Elation over the Mississippi. And last month, a fire on the Triumph knocked out power and plumbing over the Gulf of Mexico. Despite those images of misery, Carnival says booking volumes are recovering with the help of discounts and booking volumes overall are solid in this busiest season for reservations. Katz says Carnival needs to plug its safety record to bolster its bookings. SOUNDBITE: JAIME KATZ, EQUITY ANALYST, MORNINGSTAR (ENGLISH) SAYING: "They said on their call that they were kind of having some focus groups determining how they should market to consumers going forward and I think they need to get their message on safety out." Some analysts say investors should take advantage of the dip in Carnival's stock to buy, since the bounce back in bookings will offset the setback from the Triumph. The tragic sinking of Carnival's Costa Concordia last year off the coast of Italy slammed the stock. But it has since recovered. It's up 10 percent over the last 12 months. Historically, these headline grabbing incidents are short-lived, and cruise operators tend to bounce back.