There was nothing "Triumph"-ant about the outlook from Carnival Cruise Lines (CCL) Friday. Shares fell 2% after the company issued a weak forecast for sales and profits this year.
The guidance should not be a huge surprise after passengers were stranded for days in what were described as deplorable conditions on Carnival's Triumph cruise ship in the Gulf of Mexico following an engine fire.
Making matters worse, the Carnival Dream ran into problems with its generator earlier this week. And then the Carnival Legend wound up having a mechanical issue on Friday as well. The unintentionally hilarious names of these ships only add to the public relations debacle.
Shares of Carnival have missed the market rally this year as a result, falling nearly 5%. Micky Arison, chairman of Carnival, might want to consider letting people from the Miami Heat, the basketball team he owns that's currently on a 20-game winning streak, run the company instead. Clearly, they know what they're doing. At the very least, maybe disgruntled passengers could get to meet LeBron and D-Wade?
But Carnival isn't the only cruise company struggling either. Shares of rival Royal Caribbean (RCL) fell last week after the company announced that more than 100 people on the Vision of the Seas were suffering from norovirus-like symptoms. Yuck. Royal Caribbean's stock fell Friday as well on the Carnival guidance and its shares are also down year-to-date.
Investors still seem to love Norwegian Cruise Line (NCLH) though. Although shares dipped about 1% Friday, the stock is up 50% from its initial public offering price. Norwegian's IPO was in January and shares surged 30% on its debut day. But many traders on StockTwits seemed to be following the lead of the late author David Foster Wallace. They were saying that investing in cruise stocks is a supposedly fun thing they'll never do again.
Well, I think that Miami Heat general manager Pat Riley could be a good CEO. And a Survivor cruise could be great reality TV. Especially if Heat players are also on board. My money's on Udonis Haslem outwitting, outplaying and outlasting everybody else. Paging Mark Burnett!
Still, some traders felt that Carnival and its competitors will do just fine. After all, even though the company said profits would be hurt because of expenses to fix damaged ships and from some cancellations, revenue yields for the full year are still expected to be flat from a year ago. So it's not as if consumers are completely abandoning plans to take cruise vacations.
Interesting point. For what it's worth, Carnival has actually survived worse than the current cruise problems. Carnival's Costa Concordia crashed off the coast of Italy in January 2012. That disaster killed 32 people. But the stock has recovered all the ground it lost following that tragedy.
Now it's time for my Reader Comment of the Week, Pontiff Edition. My favorite follower gem this week had nothing to do with stocks, bonds or the economy. The big news story of the week obviously came from the Vatican. And this tweet shortly after the white smoke was visible almost made me fall out of my chair with laughter.
DENNIS RODMAN IS THE 266TH POPE!!!!!—
Timothy Connolly CFA (@SconsetCapital) March 13, 2013
Too funny. I guess the former Detroit Pistons Bad Boy is the world's leading diplomat after that trip to North Korea. And selecting Rodman to succeed Pop Benedict XVI would have clearly made the Vatican basketball team a more formidable threat in the 2016 Summer Olympics. Then again, Rodman might be a better candidate for contestant on that Carnival Survivor cruise.
Norwegian Cruise Line (NCLH) sailed more than 30% above its initial public offering prices when its shares debuted on the Nasdaq (NDAQ) Friday.
The third largest cruise ship operator in North America sold 23.5 million shares for $19 apiece -- slightly better than the estimated range of $16 to $18.
Norwegian Cruise Line plans to use part of the $446 million it raised to pay down some of its $3.1 billion MOREMaureen Farrell - Jan 18, 2013 11:49 AM ET
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