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Coronavirus Scare Wipes Out Half of Cruise Stocks' Market Cap

Harendra Ray
·3 min read
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The global stock markets have been rattled by the coronavirus crisis and the cruise stocks are no exception to the trend. Travel warnings and cruise cancellations are starting to take a toll on the industry. In the past month, shares of major cruise operators like Royal Caribbean Cruises Ltd. RCL, Carnival Corporation & Plc CCL and Norwegian Cruise Line Holdings Ltd. NCLH have declined 62.1%, 61.2% and 72.7%, respectively.

Apart from China, the deadly virus has spread to countries including the United States, Italy, South Korea, India, Israel, Saudi Arabia, Sweden, France, Denmark and Japan. In fact, cases of coronavirus have been reported across 124 countries and territories.

Travel Restriction Hurts Cruise Industry

The Cruise Lines International Association has submitted a plan to Vice President Michael Pence suggesting that any person over the age of 70 years shouldn’t be allowed to board a cruise if they fail to provide fitness certificate from doctor. Per Cruise Lines International Association, the average age of passengers on cruises is 47, while 14% are 70 years or above.

The proposal also includes boarding denial to those passengers and crew, who have travelled to Japan and Italy within 14 days prior to embarkation. Meanwhile, President Trump has put restriction on passenger travelling from 26 European countries to the United States. Trump said “We made a lifesaving move with early action on China. Now we must take the same action with Europe.”

While cruise business from China and Asia fell significantly, bookings for the broader business outside Asia has also softened recently thanks to travel restrictions to contain the spread of the contagion.

Coronavirus to Affect Cruise Operators 2020 Results

Royal Caribbean, which had earlier said that first-quarter and 2020 guidance did not include the impact of the coronavirus outbreak, has withdrawn its guidance due to “uncertainty of changes in the magnitude, duration and geographic reach of coronavirus”. Royal Caribbean currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Carnival has not only suspended cruise operations from Chinese ports but also cancelled voyages to other parts of Asia. Cancellations are impacting the booking trends, which in turn will also impact 2020 financial results. The Zacks Rank #3 company is currently unable to ascertain the full financial impact on fiscal 2020. In the event that the company has to suspend all operations in Asia through the end of April, it would hurt fiscal 2020 financial performance by 55 cents-65 cents per share, which includes guest compensation.

Norwegian Cruise Line has canceled, modified or redeployed 40 voyages, which includes 24 voyages on Norwegian Cruise Line, 10 on Oceania Cruises and six on Regent Seven Seas Cruises. The Zacks Rank #5 (Strong Sell) company stated that it will not deploy any vessels in Asia through the end of third-quarter 2020.

The aforementioned factor is expected to impact 2020 adjusted earnings by 75 cents per share. Per management, 2020 results are likely to be materially impacted if apprehensions regarding the coronavirus continue to intensify.

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