QUOTE AND NEWS
Benzinga  Jan 19  Comment 
On CNBC's Fast Money Halftime Report, Stephanie Link spoke about changes in her portfolio for the Fast Money Halftime Report contest. Link decided to buy Carnival Corp (NYSE: CCL), because she believes that the stock is going to benefit from...
Forbes  Jan 14  Comment 
Antero Resources Midstream Management declared a cash distribution of $0.22 per unit for the fourth quarter of 2015. The distribution represents a 29% increase over the minimum quarterly distribution and a 7% increase quarter-over-quarter. The...
Benzinga  Jan 4  Comment 
2015 proved to be a lucrative year for many cruise liners, as an improving economy and low fuel prices created the perfect conditions for a rebuilding year. Industry juggernaut Carnival Corp (NYSE: CCL) saw its shares rise 19.43 percent over the...
Benzinga  Dec 30  Comment 
Shares of Carnival Corp (NYSE: CCL) were trading higher by more than 1 percent on Wednesday and hit a new 52-week high of $55.73 after the company announced plans to purchase four new cruise ships for delivery in 2019 and 2020. Carnival noted...
newratings.com  Dec 18  Comment 
PANAMA (dpa-AFX) - Carnival Corp. (CCL.L) released a profit for its fourth quarter that climbed from last year. The company said its bottom line advanced to $389 million, or $0.50 per share. This was higher than $208 million, or $0.27 per share,...
Forbes  Dec 1  Comment 
Among the underlying components of the S&P 500 index, we saw noteworthy options trading volume today in Carnival Corp. (NYSE: CCL), where a total of 24,147 contracts have traded so far, representing approximately 2.4 million underlying shares....
Benzinga  Nov 25  Comment 
HSBC initiated coverage on Carnival Corp (NYSE: CCL) with a Buy rating. The target price for Carnival is set to $60. Carnival shares closed at $50.42 on Tuesday. Analysts at Stifel Nicolaus initiated coverage on Watsco Inc (NYSE: WSO) with a...
Market Intelligence Center  Nov 25  Comment 
With bearish technical indicators and a 4 STARS (out of 5) buy ranking from Standard & Poor’s, Carnival Corp (CCL) could be an attractive play for investors according to MarketIntelligenceCenter.com's patented option-trade picking algorithms. A...
Benzinga  Nov 16  Comment 
Starwood Hotels & Resorts Worldwide Inc (NYSE: HOT) fell 6.13 percent to $70.40 in pre-market trading after Marriott International Inc (NASDAQ: MAR) announced its plans to buy Starwood for $12.2 billion. Marriott International Inc (NASDAQ:...




 

Carnival Cruise Lines (NYSE: CCL) is the largest operator of vacation cruise ships in the world. With 81 cruise liners carrying over 7 million passengers worldwide, the company commands around 49% of the global cruise industry[1]. The company makes money from ticket sales as well as on-board revenue from gambling, shore excursions, bar revenues, and other amenities across brands including Carnival Cruise Lines, Princess, Costa, Holland America Line, P&O, AIDA, Cunard, and Seabourn.

Surveys estimate that there are some 127 million potential passengers for cruises in North America alone (defined as members of households with a minimum income threshold of $40,000, headed by a person at least 25 years old), and that half of these individuals have expressed an interest in taking a cruise. Yet, only about 17% of this captive market has ever taken a cruise, meaning there is room for greater market penetration and maturity. This represents a tremendous growth opportunity for CCL in the future. Europe also represents a large growth opportunity, as cruises currently make up a very small percentage of the overall vacation market in Europe.[2]

Furthermore, over 60% of worldwide cruise passengers are over the age of 40. Despite the risks associated with terrorism, rising oil prices, and natural disasters, then, cruises have and may continue to become increasingly popular as Baby Boomers enter retirement.

Company Overview

CCL operates in the multi-night vacation industry. Approximately 63% of the cruise passengers in the world are sourced from North America, where cruising has developed into a mainstream alternative to land-based vacations.[3] Between 2008 and 2009, this market has grown from 10.3 million customers to 10.4 million. However, only 48% of CCL's total revenues are earned from North American cruise customers- therefore, there is strong potential for CCL to further develop and expand its North American revenues.[2]

Business Financials

In 2009, CCL earned total revenues of $10.4 billion, a slight decline from its 2008 total revenues of $11.6 billion. This in turn had a negative impact on CCL's net income. Between 2008 and 2009, CCL's net income decreased from $1.8 billion in 2008 compared to its net income of $1.4 billion in 2009.

Trends & Forces

Disposable income

Cruise lines compete for the discretionary income of consumers. Cruises and vacations are discretionary purchases, luxury goods enjoyed only when income is available for spending after necessities are covered. Thus, the discretionary income levels of the company’s customer base can have a material effect on the company’s sales. Not surprisingly, the company operates in places like the United States and Western Europe, where the per capita discretionary income is on average substantially higher than in many other countries.

CCL is superior in brand diversity, price discrimination, and international exposure

CCL's strategy has been to leverage its extensive brand portfolio to price discriminate and capture various market segments and demographics. CCL has more brands (also more well-recognized brands) than chief competitor, Royal Caribbean Cruises (RCL), which gives it a leg up in capturing global market share. It also makes more of its money from international operations and has been in non-North American markets for more time than RCL. This gives it greater international market penetration and brand awareness, and the geographic diversity helps partly shield against isolated economic effects in any one of its markets.


Terrorism, Pirate attacks and Geopolitical Risk

The company is at risk of declines in its business from terrorist attacks and geopolitical unrest, even if not targeted specifically to its ships. Cruise-goers may be frightened by the possibility of an attack on their ship, leading to declines in ticket sales. An example of this was the pirate attacks on cruise ships near Somalia during 2009 and 2010. Generally, travel at large declines notably in the wake of a terrorist attack, and cruises are no exception. To be sure, consumer attitudes matter. The market, of course, realizes this: in just days after September 11, 2001, the company’s shares lost around one third of their value.

Aging baby boomers

As the baby boomers continue entering retirement, the company stands to benefit from the tailwinds of an increase in senior traffic, as it derives a large percentage of its income from passengers over 55. It is likely that seniors may continue to gravitate toward warmer-weather vacations. Coupled with the fact that retirement means more time to one’s self, and for many baby boomers, time to travel, the company has significant demographic tailwinds working in its favor.

Hurricanes, natural disasters, and weather patterns

The company can be adversely affected by particularly bad hurricane seasons, natural disasters, and inclement weather patterns. Many of the company's cruises are to Caribbean destinations, where hurricanes pose a major threat to business. Consumers are less likely to buy, for instance, a Caribbean cruise if a major hurricane is anticipated. Furthermore, the company depends upon the availability of ports, so coastal weather patterns can limit CCL’s ability to procure ports. If inclement weather or disasters hit port areas, the company can struggle to call on vital ports, which would adversely affect its business.

Continued financial viability of travel agents

The vast majority of the company's sales come from travel agents who arrange cruises on behalf of clients. The travel agency business is not necessarily what it used to be. Given the emergence of internet-based travel bookings and direct to consumer models of selling airline tickets, their business in general has declined. Because the company depends on a broad base of going-concern travel agents, any prolonged slump or major consolidation in the travel agency business could adversely impact the company. Furthermore, if travel agents force the company to increase commissions in order that they compete successfully, the company can see major pressures on margins. The approximate 10% commissions offered to travel agents now is the company's largest variable cost,[4] so changes here can have big effects on the company's bottom line.

Competition and Market Share

The company competes against a number of smaller cruise line operators, but as the market leader, with a 44% market share, it enjoys certain competitive advantages and economies of scale that competitors do not. With the largest number of ships and the greatest capacity, the company spreads much of its corporate overhead over a larger cruise liner base and has heftier margins, since it can do things like leverage size for more favorable purchases of on-board equipment and supplies. Its largest competitor is Royal Caribbean Cruises (RCL) which commands a nearly 23% market share. Other notable competitors include Star Cruises (which operates Star Cruise Line and Norwegian Cruises) and Mediterranean Shipping Company (which operates MSC Cruises).

Footnotes

  1. [1]
  2. 2.0 2.1 CCL 10-K 2009 Item 1 Pg. 4
  3. CCL 10-K 2009 Item 1 Pg. 5
  4. CCL 2007 10-Q, Q3, "MD&A," pg 11
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