Carnival Corporation (CCL), Royal Caribbean Cruises Ltd. (RCL): This Stock’s Recent Rebound Is a Sucker Rally

Page 1 of 2

Carnival Corporation (NYSE:CCL), the world’s largest cruise operator, recently announced a restructuring plan which involves splitting the roles of the CEO and the Chairman. Micky Arison, whose father founded the company in 1972, relinquished his role as the CEO, with Arnold Donald taking up the position. Nonetheless, Arison is expected to remain a key figure in the company’s leadership, and will certainly be involved in making some key decisions. Since the company reported FQ2, 2013 results, a rebound in stock price has been the highlight, but how long can it continue?

Carnival Corporation (NYSE:CCL)

Carnival Corporation (NYSE:CCL) is in the process of trying to recover a significant chunk of its market share following its most recent disasters in 2012 and 2013. The company is still recovering from the effects of the sinking of Costa Concordia off Italy in January 2012. In February this year, Carnival Corporation (NYSE:CCL) suffered another setback after an engine caught fire in the Gulf of Mexico, while in a separate incident, robberies followed shortly, with 22 passengers being the victims.

All these events have resulted in reduced bookings, forcing the company to give discounts in a bid to rebuild customer base. However, this strategy could do more harm than good in the long run as margins are set to suffer amid fluctuating fuel prices.

A pleasant surprise as fuel costs decline

Carnival Corporation (NYSE:CCL) reported $72 million, or $0.09 per share, in non-GAAP income, down from $159 million, or $0.20 per share, in the same quarter last year. Analysts polled by Thomson Reuters had projected a net income of about $0.06 per share, excluding special items. However, the company’s revenue missed the analyst estimate of $3.55 billion as it came in at $3.48 billion, down from $3.54 billion reported in the same quarter last year.

The company’s impressive profits were largely due to the reduction in fuel costs, which fell 10% during the quarter. The fall in revenue was due to the decline in bookings for the company’s largest brand, Carnival Corporation (NYSE:CCL), which holds the largest inventory to sell. Additionally, the discounting, which is expected to continue through 2014, affected revenue from the unit.

Competition

Carnival Corporation (NYSE:CCL) faces competition from the Royal Caribbean Cruises Ltd. (NYSE:RCL) and Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH), in the cruise and resorts industry. The two have capitalized on Carnival’s troubles despite the fact that their pricing remains high, overall. For instance, a seven-night Royal Caribbean Cruises Ltd. (NYSE:RCL) goes for about $350. On the other hand, a five-night Carnival cruise has already sold for as little as $249, not a direct comparison but the picture is imprinted on the pricing.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 9 Most Dangerous Countries for Tourists to Visit

Reign of Terror: The 10 Most Ruthless Politicians in History

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!