Carnival (CCL) Well-Positioned to Capitalize on Economic Rebound - Barron's
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Price: $26.41 -1.68%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 2.3%
Revenue Growth %: +4.1%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 2.3%
Revenue Growth %: +4.1%
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Carnival Corporation (NYSE: CCL) shares are trading higher as Barron's believes profit's may finally be returning to port for the dominant U.S. cruise ship operator.
Shares recently sold off following lowered FY11 guidance from the Miami, FL-based company, following Q1 earnings. Carnival cited higher fuel costs and Mideast turmoil on the move.
With shares depressed to 2004 levels, many bulls on Wall Street are chomping at the bit to get their hands on Carnival. Some argue the stock is not taking into consideration potential snap-back profits next year, increasing free cash flow, and tightening capacity growth in the industry.
Carnival's inability to generate free cash flow (FCF) over the past several years, due to spending on new ships, has made a case for bears of the stock. CapEx for Carnival has been north of $3 billion per year over the last four years.
Bulls contend that FCF is already dropping, and will continue to do so, providing for $1.1 billion of FCF in 2011 which is expected to increase to $1.7 billion in 2012.
One analyst, from Barclays, contends that Carnival could earn $4 per share by 2014, pending the continued decline of fuel prices.
Some risks Carnival may be able to overcome include geopolitical disturbances, and disease outbreaks. However, Carnival's ability to move ships to meet demand in different parts of the globe will help to curb those risks.
Carnival typically trades at a higher P/E than rival Royal Caribbean (NYSE: RCL), mostly due to its larger size. With both Carnival and Royal Caribbean having $9 billion in debt, Carnival looks like a better deal when comparing equity value: $9 billion versus $31 billion for Carnival.
Finally, with many baby boomers in the U.S. reaching retirement age, providing for more time to travel, and increasing wealth in emerging markets, Carnival may be just the stock to shore-up an investor's portfolio.
Carnival is trading 0.3% better midday movement Monday.
Shares recently sold off following lowered FY11 guidance from the Miami, FL-based company, following Q1 earnings. Carnival cited higher fuel costs and Mideast turmoil on the move.
With shares depressed to 2004 levels, many bulls on Wall Street are chomping at the bit to get their hands on Carnival. Some argue the stock is not taking into consideration potential snap-back profits next year, increasing free cash flow, and tightening capacity growth in the industry.
Carnival's inability to generate free cash flow (FCF) over the past several years, due to spending on new ships, has made a case for bears of the stock. CapEx for Carnival has been north of $3 billion per year over the last four years.
Bulls contend that FCF is already dropping, and will continue to do so, providing for $1.1 billion of FCF in 2011 which is expected to increase to $1.7 billion in 2012.
One analyst, from Barclays, contends that Carnival could earn $4 per share by 2014, pending the continued decline of fuel prices.
Some risks Carnival may be able to overcome include geopolitical disturbances, and disease outbreaks. However, Carnival's ability to move ships to meet demand in different parts of the globe will help to curb those risks.
Carnival typically trades at a higher P/E than rival Royal Caribbean (NYSE: RCL), mostly due to its larger size. With both Carnival and Royal Caribbean having $9 billion in debt, Carnival looks like a better deal when comparing equity value: $9 billion versus $31 billion for Carnival.
Finally, with many baby boomers in the U.S. reaching retirement age, providing for more time to travel, and increasing wealth in emerging markets, Carnival may be just the stock to shore-up an investor's portfolio.
Carnival is trading 0.3% better midday movement Monday.
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