Shore Capital reiterates stance on 'attractive' Carnival
Analysts at Shore Capital reiterated their 'hold' rating and 4,735p target price on travel and leisure outfit Carnival on Friday, noting that although the firm's third-quarter results were "slightly ahead of guidance", fuel and FX headwinds had continued to weigh on earnings.
Carnival
1,027.50p
16:35 19/04/24
FTSE 100
7,895.85
16:59 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
Travel & Leisure
7,521.61
17:10 19/04/24
Shore Cap noted that how Carnival's cumulative bookings for the first half of 2019 were said to be "ahead at prices in line with last year" with yield growth expected to slow further throughout the half.
"The key to the investment case is whether the industry can continue to deliver robust yield growth against the backdrop of accelerating capacity growth," said Shore Capital analyst Greg Johnson.
"Based on circa 2% annual yield growth over the medium term, we see fair value of £52/share. We retain our 'hold' stance viewing a price of £42/share, which would be discounting 0-1% annual yield progression, as an attractive entry level."
With a net capacity growth of 4.7%, unit cost growth of 1% and a 21c drag from FX/fuel, the broker forecast $4.42 for Carnival's full-year 2019 EPS - a $0.10 drop on its prior estimate due to a higher than previously expected drag from FX and fuel.
Shore Cap also called out tough comparatives in the earlier part of the year, especially after the twelve-month mark since a devastating set of hurricanes ravaged the Caribbean.