Hedge Fund Analysts Make Bearish Call on Carnival Cruise Lines

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Hedge Fund Analysts Make Bearish Call on Carnival Cruise Lines
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Compared to last year’s third fiscal quarter, Carnival Cruise Lines ( CCL ) is seeing a significant reduction in both EPS and revenue. This year, CCL has had its fair share of problems: a fall in consumer spending, a string of problems with their cruise liners, and a huge public relations nightmare since their Costa Concordia liner ran aground in Tunisia last year. CCL’s top line has also been rather weak due to lower revenue yields due to CCL spending more on marketing in order to bring in new customers since the Costa disaster. It’s apparent that CCL is trying its hardest to improve its public image since the disaster, but it’ll definitely take time for the consumer to slowly disassociate the CCL brand with the Costa Concordia disaster of last year.

Carnival Cruise Lines is expected to report FQ4 2014 earnings on December 19th. The information below is derived from data submitted to the Estimize  platform by a set of Buy Side and Independent analyst contributors.

The current Wall Street consensus expectation is for CCL to report $0 EPS and $3.577B revenue while the current Estimize consensus from 6 Buy Side and Independent contributing analysts is $0 EPS and $3.557B revenue. The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case, we’re seeing a smaller differential between the Estimize and Wall Street numbers compared to previous quarters.

Over the past four months the Wall Street consensus trend for EPS has decline from $1.3 to $0 while Wall Street revenue expectations have fallen from $4.640B to $3.577B. The Estimize EPS has fallen this quarter with EPS going from $1.32 to $0 and revenue dropped from $4.663B to $3.575B.

Over the previous 6 quarters, CCL has beaten the Wall Street consensus for EPS 1 time and revenue 4 times. Over the same time period CCL has beaten the Estimize EPS consensus 1 time and beaten the Estimize Revenue consensus 4 times.

The distribution of estimates published by analysts on Estimize range from -$0.03 to $0.02 EPS and $3.555B to $3.597B in revenues. We’re seeing a smaller distribution of estimates this quarter for CCL than normal. The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A narrower distribution signaling the potential for greater volatility post earnings, a wider vice versa.

The analyst with the highest estimate confidence rating this quarter is Zach Lehner who projects a $0.01 EPS and $3.575B in revenue. Estimate confidence ratings are calculated through algorithms developed by our deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy.

The public relations disaster that the Costa Concordia disaster caused to Carnival Cruise Lines can still be felt within the company finances. As the summer months begin approaching, expect CCL to increase its plowback, especially in its marketing divison. And though that might hurt CCL’s top line, the overall goal is to recreate the public perception of CCL as a changed company since the disaster. Therefore, future revenue will highly depend on how well CCL can change the public perception and how many customers they can bring back.

Get access to estimates for Carnival Cruise Lines published by your Buy Side and Independent analyst peers, and register to create your own estimates by heading over to   Estimize  now.

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