With Earnings, Carnival Cruise Lines Is Fully Valued

Leading cruise operating Carnival Cruise Lines (CCL) reported solid fiscal year 3rd quarter earnings this morning. EPS of $1.33 a share beat their previous guidance of $1.15-$1.19 and they raised their full year forecast from $2.00-$2.10 to $2.16-$2.20. On a constant dollar basis net revenue yields, revenue per available bed day, decreased 12.3% from the year ago period. Overall revenues were off 14% and net income 20% from the year ago period. All in all, not a bad showing for a highly cyclical consumer discretionary company.

Still, at $34 the stock is trading at 15-16 times this years earnings. Not expensive but fully valued for a company in this line of business in this economic environment.

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Disclosure: Top Gun has no position in Carnival (CCL) shares.

Comments

[anon09:]

all well and good - but 15-16x this year still looks an awful lot better than RCL at 33.5x this year. also RCL has a 41% EPS CAGR naked in between now & 2013, vs. only 9% for CCL - something that is clearly not right. rather than take a directional bet on the sector, why not buy CCL vs. RCL on the valuation disparity and elimintae market/sector risk?!

Sep 23 09:09 AM

[User 337526:]

how are you arriving at your 41% vs 9% cagr? are you looking at street estimates out to that time?


On Sep 23 09:09 AM anon09 wrote:

> all well and good - but 15-16x this year still looks an awful lot
> better than RCL at 33.5x this year. also RCL has a 41% EPS CAGR naked
> in between now & 2013, vs. only 9% for CCL - something that is
> clearly not right. rather than take a directional bet on the sector,
> why not buy CCL vs. RCL on the valuation disparity and elimintae
> market/sector risk?!

Sep 23 12:17 PM

[anon09:]

yes - whether you think it's a useful exercise or not, consensus currently expects RCL to earn $4.11/share in 2013 vs. $0.72 this year. My argument is not about the dollar value of earnings, but more the relative expectations between CCL & RCL...if RCL can acheive this growth rate, then surely CCL can do likewise...leverage will only help RCL for so long through a recovery

also, they're now far more susceptible to soft consumer data, which i fully expect to see in the next 6months


On Sep 23 12:17 PM User 337526 wrote:

> how are you arriving at your 41% vs 9% cagr? are you looking at street
> estimates out to that time?

Sep 24 08:22 AM