Our Gaming, Lodging & Leisure Team -- led by Todd Jordan -- is hosting an institutional conference call and slide deck presentation to discuss their Best Idea Short thesis on Carnival (CCL), the American-British cruise company and the world's largest travel leisure company. The call will take place on Thursday March 9th at 11am ET.
We believe expectations remain high for 2017 – the valuation resides at the higher end of normalized, historical averages. And while expectations are for CCL to raise its 2017 yield guidance, several less known offsets need to be considered.
Email sales@hedgeye.com for more information.
KEY DISCUSSION POINTS
CHINA - MAJESTIC LIFT NOT GOOD ENOUGH TO OFFSET COSTA
It will be another four months before Majestic Princess's inaugural voyage out of Shanghai. Majestic pricing was hot out of the gate but has decelerated significantly in the past 2 months. More concerning is the Costa China brand which is heading for a double digit decline in pricing. The ban on South Korea tours, stemming from the icy relationship between South Korea and China, adds more uncertainty for China cruising.
CCL BRAND WEAKNESS IN EUROPE
Surprising pricing pressure for certain CCL UK/ Europe brands suggest heightened promotional activity to drive bookings. The Italian referendum may be having a delayed impact on some Costa itineraries while Brexit (6 months later) may be finally impacting pricing & booking trends for P&O UK and Cunard brands. In addition, weakening consumer sentiment in Italy and the UK may indicate further downside risk.
BIG WAVE BUT ZIKA REEMERGENCE COULD IMPACT CLOSE IN PRICING
Wave Season finished up nicely with a big February boost in Caribbean pricing for 2H 2017. CCL's staggered, short CarnivalDays promos were normal promos; in other words, no additional incentives were offered to cruisers during Wave Season. We estimate Caribbean pricing fleetwide to be up 7% YoY for FY 2017 - a little above Street expectations. We've done more work on Zika and fear that warmer weather could bring a similar Zika outbreak to last year, which could impact close-in pricing. Already, a scatter of Zika cases have popped up recently and insecticides may be proving ineffective.
CALL DETAILS
Ping sales@hedgeye.com for more information. Please note if you are not a current subscriber to our GLL research there will be a fee associated with this call.
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