Editor's Note: Carnival Cruise Lines (CCL) has been one of our Gaming, Lodging & Leisure team's top short ideas. Shares fell as much as 8% today. Incidentally, it was also added to our Investing Ideas product on June 13th by Hedgeye CEO Keith McCullough.
Carnival (CCL) disappointed investors this morning.
The company guided 1H 2019 yield growth to “below Q4 2018’s” aka below the 2% midpoint. That is substantially below growing expectations and even below our estimate, as we have been modeling another year of yield deceleration for CCL.
As we highlighted in our note on 9/21 "CCL VS RCL | TRADING PLACES," CCL looked like the weakling heading into 2019, particularly on Caribbean pricing. As for 2018, CCL did raise FY yield growth guidance to 3.5%, as we expected, but cost guidance was hiked as well, “primarily due to the accounting treatment for ships sold in Q3”. 3.5% yield growth in 2018 trails actual 4.5% growth in 2017.
Q3 yield growth was only in-line despite the big runup in the stock price since August. The lack of hurricanes disrupting the Caribbean this summer had boosted sentiment and bookings but looks like it’s not enough to change CCL’s forward pricing language of “in-line.”
In fact, without the Labor Day boost, prices since June were running lower YoY. Higher European prices are offsetting lower Caribbean pricing but this is not translating into higher yield growth. Our deceleration yield theme remains intact.