Nomura Securities on Cruise Lines: Raising Q2 EPS on Lower Fuel Prices

June 7, 2012 9:00 AM EDT
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Nomura Securities on Cruise Lines: Raising Q2 EPS on Lower Fuel Prices

Analyst, Harry Curtis, said, "It’s too soon to tell if bunker prices will stay down, so we are not changing our 2H12 EPS estimates. However, we point out that investor interest in the group is about as weak as the Miami Heat’s performance on 6/4. If bunker fuel behaves itself (recovering 10% from its current level, in a more stable global economy), then it is likely that investor interest will recover and that CCL and RCL could trade to our $36 price target for both companies. In addition, cost savings from lower fuel prices could add about $2 to our 2013 price targets."

"The cruise lines have been under pressure from high bunker costs, and continued fallout from the Costa Concordia sinking in January. We think 2Q and 3Q should be difficult for the lines. However, by the end of the 3Q (with the Concordia disruption behind them), the lines will have completed bookings for 75% of 1Q13, 50% of 2Q13, and 25% of 3Q13. That will be enough to make credible comments about pricing next year, which, judging from current commentary and pricing, should be positive."

For Royal Carribean (NYSE: RCL), Nomura raises Q2 EPS from $0.00 to $0.04 and FY12 from $1.90 to $1.94.

For Carnival (NYSE: CCL), Q2 EPS raised from $0.08 to $0.11 and FY12 from $1.68 to $1.71.

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