Jefferies Downgrades Carnival Corporation (CCL) to Underperform

February 11, 2014 6:51 AM EST Send to a Friend
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Price: $41.57 -0.07%

Rating Summary:
    10 Buy, 10 Hold, 2 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 13 | Down: 18 | New: 41
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Jefferies downgraded Carnival Corporation (NYSE: CCL) from Hold to Underperform with a price target of $33.00 (from $31.00). Analyst Ian Rennardson said shares are now reflecting a best-case scenario.

"We acknowledge the significant recovery potential in earnings for CCL over the next few years, albeit with significant execution risk, but believe this to be more than priced into the share prices," Rennardson said. "Our forecasts are based on a 1% fall in yields in 2014, followed by c3% increases in 2015 and 2016. This leaves the shares trading at c20x 2015 PE, well above long-term averages. History tells us that the market has been too optimistic in forecasting EPS since 2006. All other things being equal, +/- 1% on/off yield is +/- 16 cents EPS, or 10% 2014e EPS. Our forecasts were unchanged post 2013 results."

Meanwhile, the firm reiterate a Buy recommendation on Royal Caribbean (NYSE: RCL) and raised target to $58, saying the discount increasingly difficult to justify. "Despite its superior operating performance and improving balance sheet, RCL continues to trade at a significant discount to CCL (c20% on an EV/EBITDA basis and 40% on PE). Our forecasts are based on 3% yield growth 2014-2016. All other things being equal, +/- 1% on/off yield is +/- 27 cents EPS or 8% 2014e EPS. Following slightly better than expected 2013 results and a positive outlook statement, we raise our 2014e EPS by 8% and 2015e EPS by 5%."

For an analyst ratings summary and ratings history on Carnival Corporation click here. For more ratings news on Carnival Corporation click here.

Shares of Carnival Corporation closed at $40.31 yesterday.


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