Cruise Stocks Hit Choppy Water on Disappointing Carnival Outlook

(Bloomberg) -- A disappointing forecast from Carnival Corp. signaled that the world’s largest cruise line is struggling to raise fares, sending a wave of pessimism across the industry.

The company expects its 2019 net yield -- a key benchmark -- to climb just 1 percent when accounting for currency fluctuations. Analysts projected 2.4 percent, according to Consensus Metrix. That sent the stock on its worst tumble in nearly three months, pulling down Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings Ltd. as well.

Investors are looking for cruise lines to capitalize on easing fuel costs, upgraded ships and spiffy new amenities. But the outlook suggests Carnival and others may have trouble getting passengers to pay more for their journey. Though Carnival’s booking volumes have been significantly higher since September, its pricing is running in line, the Miami-based company said.

Carnival dropped as much as 8.3 percent to $50.42, while Royal Caribbean fell 4.5 percent to $97.39. Norwegian slipped 4.8 percent to $42.98.

Harry Curtis, an Instinet LLC analyst with a buy recommendation on Carnival, sees the downturn as an opportunity -- assuming the broader economy holds up.

“As long as the economy does not tilt into a recession next year, periods of such depressed valuation for cruise stocks should be used to initiate or build positions,” he said in a note.

©2018 Bloomberg L.P.