Carnival Corp. saw its stock price target raised at least three times on Monday, despite facing a number of challenges heading into the new year.
On Friday, the cruise company reported an earnings and revenue beat, but also said it would have to cancel eight sailings of the new Mardi Gras due to a delivery delay.
In addition, there was a report of an accident involving the Carnival Glory that resulted in six minor injuries.
This comes after a year that saw an abrupt regulatory shift in Cuba that halted travel to the island, Hurricane Dorian, geopolitical events in the Arabian Gulf and a host of other circumstances that impacted Carnival’s ability to operate its ships.
Chief Executive Arnold Donald said these “unusual events” cost the company about 23 cents per share in earnings.
And then there was the 30 cents per-share cost to fiscal 2019 from the decline in the Continental European brands. Donald said about half of the company’s guests come from outside the U.S. and a “large percentage” is weighted toward regions that are currently facing challenges.
“[O]ur adjusted earnings per share guidance of $4.30 to $4.60 today reflects that it will likely take beyond 2020 to achieve that level of earnings growth given the current environment in Europe and the relative weighting of European sourcing in our portfolio,” Donald said on the Friday earnings call, according to a FactSet transcript.
The FactSet outlook is for EPS of $4.41.
Still analysts raised their price targets.
“[W]hile we continue to be disappointed with Carnival’s relative underperformance, we are raising our price target to reflect what would appear to be a bottoming in sentiment,” wrote Wedbush analysts led by James Hardiman.
Wedbush rates Carnival shares as neutral with a $50 price target, up from $43.
The new price target “is based on 11X our 2020 estimate, although this remains the smallest target multiple afforded the cruise names due to the disparate trajectory for Carnival relative to Royal Caribbean Cruises Ltd.
and Norwegian Cruise Line Holdings Ltd.”
SunTrust Robinson Humphrey says the Caribbean is doing well and Carnival is benefiting from a stronger currency exchange and fuel tailwind in 2020 than was expected.
SunTrust rates Carnival stock as hold with a $51 price target, up from $47.
And Stifel raised its target price to $59 from $54 while maintaining its buy rating.
Things may not look so great now, but Stifel analysts led by Steven Wieczynski said the company is “another quarter closer to an inflection point, making the probability of positive revisions to guidance, once the historical norm for the company, a more likely outcome than downward ones.”
Carnival stock closed Friday up 7.6% and up 2.1% in Monday trading. Shares have gained 10.2% over the past year while the S&P 500 index
is up 37.1% for the period.
“[G]iven our belief in the resiliency of the core cruise operating model over the long term and Carnival’s unique scale-aided cost advantages, we believe there could be upside to numbers as these pressures abate,” Stifel said.