Carnival Shares Climb Over 4% As Revenue Tops Estimates, Bookings Recovery Helps

Carnival shares rose over 4% on Friday after the world’s largest cruise ship operator reported better than expected revenue in the third quarter and said its cumulative advanced bookings for the second half of 2022 are ahead of pre-COVID-19 pandemic levels.

The firm reported revenue of $636 million, beating the wall street consensus estimates of $535 million.

The Miami, Florida-based company said its booking volumes for all future cruises during the third quarter of 2021 were higher than booking volumes during the first quarter of 2021. The company added that as of August 31, 2021, eight of the company’s nine brands have resumed guest operations as part of its gradual return to service.

Carnival said it ended the third quarter of 2021 with $7.8 billion of liquidity, which the company believes is sufficient to return to full cruise operations. Voyages for the third quarter of 2021 were cash flow positive and the company expects this to continue.

Following this optimism, Carnival shares rose over 4% to $25.72 on Friday.

However, the company reported U.S. GAAP net loss of $2.8 billion and an adjusted net loss of $2.0 billion for the third quarter of 2021.

Analyst Comments

“The company says Q3 occupancy was 54% and built during the month, and revenue per passenger cruise day was above 2019, driven by exceptionally strong onboard and other revenue. For the Carnival brand, revenue per PCD was 20% higher than 2019, despite onboard credits from cancelled cruises, with occupancy of 70%,” noted Jamie Rollo, Equity Analyst at Morgan Stanley.

“The comment on onboard spend is encouraging, and while there is no comment on ticket prices being up, we note that revenue per passenger is unlikely to be comparable to 2019 due to a difference mix of cabins. Q3 voyages were cash flow positive, and it expects this to continue. Despite the positive operating KPIs, the results were well below expectations, suggesting higher restart/lay-up/SG&A costs.”

Carnival Stock Price Forecast

Nine analysts who offered stock ratings for Carnival in the last three months forecast the average price in 12 months of $27.91 with a high forecast of $39.00 and a low forecast of $18.00.

The average price target represents an 8.90% change from the last price of $25.63. From those eight analysts, four rated “Buy”, one rated “Hold” while four rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $18 with a high of $40 under a bull scenario and $5 under the worst-case scenario. The firm gave an “Underweight” rating on the cruise ship operator’s stock.

Several other analysts have also updated their stock outlook. JPMorgan lifted their price objective to $36 from $33 and gave the company a “neutral” rating. Citigroup raised their target price to $34 from $30 and gave the stock a “buy” rating.

Check out FX Empire’s earnings calendar

European Shares Bounce After Worst Session in Two Months; UMG Soars in Debut

The pan-European STOXX 600 was up 0.9% by 07:43 GMT after sinking to a two-month low in the previous session.

Media, mining and energy stocks led early gains, while Germany’s DAX rebounded from its lowest level since late-July.

U.S. stock futures also bounced a day after global markets were roiled by concerns the potential default by Evergrande, the world’s biggest property developer, could hurt China’s real estate sector, banks and the global economy.

Evergrande, struggling for cash, owes $305 billion.

Focus this week is also on policy meetings at a slate of central banks, including the U.S. Federal Reserve, with investors expecting some of them to indicate they were ready to ease their pandemic-era stimulus to combat high inflation.

“Concerns about Evergrande remain but for now there appears to be a wait-and-see approach being adopted,” said Michael Hewson, chief market analyst at CMC Markets UK.

“The bigger question given the risks from events in China is whether the Fed adopts a less hawkish stance tomorrow in order to buy itself some time until the situation becomes clearer.”

Europe’s benchmark STOXX 600 has fallen from record highs in September after seven straight months of gains on fears of persistently high COVID-19 cases and signs of a slowdown in the global economic recovery.

However, helping sentiment on Tuesday, travel-related stocks including British Airways-owner IAG, cruiseliner Carnival Corp and InterContinental Hotels Group jumped between 2% and 5% following the relaxation of U.S. travel curbs.

Britain’s National Express rose 4% after rival Stagecoach Group said it was in talks with National Express about a possible all-share merger.

Stagecoach’s shares jumped 17.3%.

Universal Music Group, the business behind singers such as Lady Gaga, Taylor Swift and The Weeknd, surged 38% in its first day of trading, giving it a market capitalisation of more than 46 billion euros ($54 billion).

Shares of owner Vivendi sank 16.7%.

Sweden’s gardening power tools group Husqvarna tumbled 5.4% after warning it could potentially lose top line sales of up to around 2 billion crowns ($230.7 million) due to a supplier dispute.

All major European bourses were up in morning trading, with the UK’s FTSE 100, Spain’s IBEX and Italy’s FTSE MIB gaining between 0.7% and 0.9%.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Arun Koyyur)

Carnival Sees Return to Cruises with 65% Fleet Capacity by End of 2021

The company also said its Carnival Cruise Line brand has plans to bring back its entire fleet into service by the end of 2021, which would take total operating capacity to 75%.

Cruise operators began sailing from U.S. ports in June with mostly vaccinated passengers and crew on limited capacity, but a few on-board infections and rising infections in U.S. states due to the Delta variant of the coronavirus has raised worries that the recovery for the cruise industry could be delayed.

Eight of Carnival’s nine brands have so far announced plans to resume guest operations on 54 ships around the world. The company said more restart announcements are due in the coming weeks.

Carnival’s shares rose about 1% in premarket trade after falling 5.7% Monday on fears of the Delta variant’s rapid spread.

(Reporting by Uday Sampath in Bengaluru; editing by Uttaresh.V)

Cruise Operator Carnival to Sell $500 Million in Shares

Money raised will be used to purchase ordinary shares of Carnival Plc, trading in the United Kingdom, and for general corporate purposes, the company said.

The cruise operator has raised over $2.5 billion by selling its shares over the past year as travel restrictions due to the pandemic brought its business to a standstill.

With cruises ordered to operate with fewer passengers onboard while following strict hygiene and sanitization protocols, Carnival and others are expected to burn more cash to stay in business.

Cruise operators began sailing from U.S. ports last week with mostly vaccinated passengers and crew.

Shares of Carnival and peers Royal Caribbean Group, Norwegian Cruise Holdings Ltd were down about 2% each.

(Reporting by Nivedita Balu in Bengaluru; Editing by Krishna Chandra Eluri)

Carnival Posts $2 Billion in Loss on Prolonged Cruise Suspension

Cruise operators have recorded little to no revenue due to the no-sail order from the U.S. Centers for Disease Control and Prevention, forcing them to tap billions of dollars in debt and even sell a few ships to stay afloat.

Carnival ended the second quarter with $9.3 billion in cash and short-term investments, down from $11.5 billion at the end of the first quarter, as it spent heavily to prepare its ships for voyages.

Net loss was $2.07 billion for the second quarter ended May 31, compared with $4.37 billion a year earlier. Refinitiv data shows Carnival’s loss in the last four quarter was $1.97 billion at the least.

The operator of Princess Cruises also backed its expectations for a third-quarter loss.

(Reporting by Praveen Paramasivam in Bengaluru; Editing by Anil D’Silva)

Why Carnival Stock Moved To Yearly Highs

Carnival Corporation Video 01.06.21.

Carnival Stock Gains Ground As Cruising Continues To Restart

Shares of Carnival Corporation gained upside momentum and moved to yearly highs as investors bet that cruise line operators would enjoy strong demand as coronavirus-related rules get relaxed in the second half of this year.

Yesterday, Carnival’s AIDA Cruises announced that it opened bookings for AIDAcosma over Christmas and New Year’s Eve while AIDAperla’s new Mediterranean voyages in summer 2021 could be booked from May 31.

Meanwhile, Royal Caribbean stated that Silversea Cruises announced new summer voyages in Alaska and Iceland which would begin in July 2021.

The market welcomed the news, and shares of cruise line operators moved higher in today’s trading session.

What’s Next For Carnival Corporation?

Carnival stock is up by 40% this year as traders bet that pent-up demand for cruising would provide strong support to company’s financials in the next few years.

Currently, analysts expect that Carnival would report a loss of $5.29 per share in 2021. The company is projected to return to profitability in 2022 with a profit of $0.24 per share so the stock is trading at about 127 forward P/E which is an ultra-rich valuation.

However, the market is willing to look beyond 2022 and looks ready to focus on longer-term perspectives. At this point, it is ready to ignore the rapid accumulation of debt which was raised to support the company through the acute phase of the coronavirus crisis.

The stock market remains close to all-time high levels while Fed officials managed to calm bond markets and promised to provide sufficient support in the upcoming months.

In this environment, investors and traders are willing to bet on the rebound of the hardest-hit industries, including cruising. This is bullish for Carnival stock, and the company’s shares have decent chances to gain additional upside momentum despite their lofty valuation.

For a look at all of today’s economic events, check out our economic calendar.

Why Shares Of Carnival Corporation Are Up By 5% Today?

Carnival Corporation Video 07.04.21.

Bookings Increase At A Fast Pace

Shares of Carnival gained strong upside momentum after the company released its first-quarter business update. Carnival reported GAAP net loss of $2 billion which is not surprising given the current state of the cruise industry.

However, Carnival noted that cash burn rate in the first quarter of 2021 was better than expected. The company added that booking volumes for all future cruises during the first quarter of 2021 were about 90% higher than booking volumes during the fourth quarter of 2020, which signals that demand for cruises is starting to increase at a fast pace

In fact, cumulative advanced bookings for full year 2022 were ahead of the year 2019, a sign that people are ready to get back to cruising once the situation normalizes.

What’s Next For Carnival Corporation?

The current situation on the coronavirus front remains challenging, but the market sees light at the end of the tunnel. Bookings have started to increase at a healthy pace as customers look ready to get back to their normal lives which include vacations on cruise ships.

Carnival stated that six of the company’s nine brands were expected to resume limited cruise operations by summer. Carnival noted that it expected to capitalize on pent-up demand, and the company’s booking data supports this view.

The market is clearly bullish on Carnival as the stock is up by roughly 40% year-to-date and is currently testing all-time high levels. The strong demand for future cruises may ultimately lead to higher prices for cruises, which will provide additional support to Carnival’s balance sheet.

It should be noted that the stock is trading well below pre-pandemic levels, so the market has just started to price in the turnaround of the company’s business. Analysts expect that the company will get back to profitability in 2022 with a small profit of $0.14 per share, but the market will likely try to look beyond 2022 when evaluating the company’s stock.

For a look at all of today’s economic events, check out our economic calendar.

Carnival Q1 Earnings May Be Disappointing But Shares Rise on Cautious Optimism

Carnival, the world’s largest cruise ship operator, is expected to report a loss for the fourth consecutive time in the fiscal first quarter as the COVID-19 pandemic continues to hurt business operations and global bookings.

But Carnival’s shares, which slumped about 60% in 2020 and rebounded over 30% to $28.60 so far this year, traded 2.31% higher $29.26 in after trading hours on Tuesday.

The Miami, Florida-based company is expected to report a loss of $1.54 per share, worse, compared to a profit of 22 cents per share registered in the same quarter last year. Carnival’s revenue will plunge ​nearly 100% year-on-year to $108 million.

The company did not provide earnings guidance for fiscal 2021 and was unclear as to when its business operations would return to normalcy.

Carnival Stock Price Forecast

Eleven analysts who offered stock ratings for Carnival in the last three months forecast the average price in 12 months of $24.33 with a high forecast of $42.00 and a low forecast of $14.00.

The average price target represents a -14.93% decrease from the last price of $28.60. Of those 11 analysts, four rated “Buy”, three rated “Hold” while four rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $14 with a high of $40 under a bull scenario and $5 under the worst-case scenario. The firm gave an “Underweight” rating on the cruise ship operator’s stock.

“We think the cruise industry will be one of the slowest sub-sectors to recover from COVID-19. Cruising needs not just international travel to return, but ports to reopen, authorities to permit cruising, and the return of customer confidence,” said Jamie Rollo, equity analyst at Morgan Stanley.

“We expect cruising to resume in Q2 2021, and expect FY19 EBITDA to return in FY23 given FY22 will be the first normal year, and pricing will likely come under pressure. FY19 EBITDA implies EPS 60% lower given share issue dilution and higher interest expense. We see debt doubling in FY21 vs FY19 due to operating losses and high capex commitments, and leverage looks high at 5x even in FY23e, so we see risk more equity might need to be raised.”

Several other analysts have also updated their stock outlook. JPMorgan lifted their price objective to $33 from $23 and gave the company a “neutral” rating. Truist raised their price objective to $16 from $14. Citigroup issued a “buy” rating and a $30 price objective on the stock. Credit Suisse Group increased their target price to $18 from $15 and gave the stock a “neutral” rating.

Analyst Comments

“Shares of Carnival have outperformed the industry in the past six months. The company reported fourth-quarter 2020 results, wherein earnings and revenues missed the Zacks Consensus Estimate. Its cruise operations have been halted due to the pandemic. It is also likely to result in delay in ship deliveries. Due to the uncertainty of the crisis, the company is unable to predict the entire fleet’s return to normal operations,” noted analysts at ZACKS Research.

“It anticipates average monthly cash burn in first-quarter fiscal 2021 to be nearly $600 million. The company stated that cumulative advanced bookings for the second half of 2021 are within the historical range. Moreover, bookings for the first half of 2022 are ahead of 2019. Also, it remains optimistic on its innovations featuring PlayOcean and OceanView. Addition of new ship, to its global fleet of Princess Cruises to drive growth.”

Check out FX Empire’s earnings calendar

S&P 500 Subdued as Focus Turns to Fed

By Shashank Nayar and Medha Singh

Delta Air Lines, Southwest Airlines and JetBlue Airways said leisure bookings are rising and offered some of the first concrete signs that the worst may be over for the airline industry.

The S&P 1500 airlines index jumped about 3.8% to a one-year high, while planemaker Boeing Co added about 2%.

Other travel-related stocks including Carnival Corp, Wynn Resorts and MGM Resorts gained between 3% and 5%.

Wall Street’s main indexes on Friday logged their best week in six as approval of a $1.9 trillion relief package and mass vaccinations fueled demand for economy-linked stocks such as banks, energy, materials at the cost of high-growth tech names.

The major U.S. stock indexes were roiled in recent weeks as a spike in longer-dated U.S. bond yields due to fears of an increase in inflation and, in response, a tapering of the Fed’s easy monetary policy worried investors.

“The U.S. economy looks in a better shape than most other developed economies,” said Hussein Sayed, chief market strategist at FXTM.

“Despite the rosier economic outlook, this week’s Fed meeting is expected to be absent of major policy changes.”

At the end of Fed’s two-day meeting on Wednesday, policymakers are expected to forecast that the U.S. economy will grow in 2021 at the fastest rate in decades while reiterating their dovish stance for the foreseeable future.

The yields on benchmark 10-year Treasuries hovered near their 13-month high at 1.61%, slightly lower than its peak of 1.64% hit on Friday.

At 9:47 a.m. ET, the Dow Jones Industrial Average rose 87.51 points, or 0.27%, to 32,866.15, the S&P 500 gained 0.29 points, or 0.01%, to 3,943.63 and the Nasdaq Composite lost 6.81 points, or 0.05%, to 13,313.11.

Five of the major S&P sectors were lower, with financials and energy leading losses.

Tesla Inc added “Technoking of Tesla” to billionaire Chief Executive Elon Musk’s list of official titles in a formal regulatory filing that also named finance chief Zachary Kirkhorn “Master of Coin”. Tesla’s shares were nearly flat.

Eli Lilly and Co shares slumped about 8.5% after “mixed” results from the drugmaker’s mid-stage trial testing its experimental drug to treat Alzheimer’s cast a doubt on the chances for the drug’s accelerated approval, according to analysts.

Advancing issues outnumbered decliners by a 1.2-to-1 ratio on the NYSE and a 1-to-1 ratio on the Nasdaq.

The S&P 500 posted 59 new 52-week highs and no new low, while the Nasdaq recorded 239 new highs and six new lows.

(Reporting by Shashank Nayar and Medha Singh in Bengaluru; Editing by Maju Samuel)

Earnings to Watch Next Week: Delta Airlines, BlackRock, Citigroup and Wells Fargo in Focus

Earnings Calendar For The Week Of January 11

Monday (January 11)

IN THE SPOTLIGHT: SYNNEX, CARNIVAL

SYNNEX: California-based business process services company’s earnings to decline to $2.89​ per share the fourth quarter, down from $4.26 per share reported the same quarter last year. The leading provider of business-to-business information technology services’ quarterly revenue will fall more than 5% to just over $6 billion from $ 6.58 billion a year ago.

“For the fourth quarter of fiscal 2020, revenues are expected between $6.45 billion and $6.65 billion. Non-GAAP net income is estimated in the range of $190.5 to $203.5 million. Moreover, the company projects non-GAAP earnings between $3.68 and $3.93 per share,” noted analysts at ZACKS Research.

CARNIVAL: The world’s largest cruise ship operator is expected to report a loss for the third consecutive time in the fourth quarter. The Miami, Florida-based company’s revenue will plunge ​nearly 100% to $142.09 million from $4.78 billion posted in the same period a year ago. Carnival is expected to report a loss of $1.83 per share, worse compared to a profit of 62 cents per share registered in the same quarter last year.

“We think the cruise industry will be one of the slowest sub-sectors to recover from the COVID-19. Cruising needs just not international travel to return, but ports to reopen, authorities to permit cruising, and the return of customer confidence,” said Jamie Rollo, equity analyst at Morgan Stanley.

“We expect cruising to resume in January 2021, and only expect FY19 EBITDA to return in FY24 given historically CCL has lacked pricing power, and EPS to take even longer given dilution of share issues and higher interest expense. We see debt doubling in FY21 vs FY19 due to operating losses and high capex commitments, and leverage looks high at 4-5x even in FY23-24e, so we see risk more equity might need to be raised,” Rollo added.

According to the mean Refinitiv estimate from eleven analysts, Carnival Corp is expected to show a decrease in its fourth-quarter earnings to -186 cents per share. Wall Street expects results to range from a loss of $-2.10 to ​a loss of $-1.64 per share, Reuters reported.

Tuesday (January 12)

No major earnings scheduled for release.

Wednesday (January 13)

Ticker Company EPS Forecast
INFY Infosys $0.16
WIT Wipro $0.06
SJR Shaw Communications USA $0.24
INFO IHS Markit Ltd $0.67
AONNY Aeon ADR -$0.11

 

Thursday (January 14)

IN THE SPOTLIGHT: DELTA AIRLINES, BLACKROCK

DELTA AIRLINES: The Airline company which provides scheduled air transportation for passengers and cargo throughout the United States and across the world is expected to report a loss for the fourth consecutive time of -$2.47 in last quarter of 2020 as the airlines continue to be negatively impacted by the ongoing COVID-19 pandemic. According to Ticket Report, analysts expect Delta Airlines to post $-11 EPS for the current fiscal year and $0 EPS for the next fiscal year.

“Delta is the airline most exposed to corporate travel, which was positive pre-pandemic. Corporate travel remains down 85% and the only corporate traveller flying now appears to be those at small and medium-sized businesses. Delta had hoped for a recovery in business travel in 2H21, but it is becoming increasingly clear that business travel will not be a meaningful contributor to revenue in 2021 as vaccination timelines continue to shift out,” said Helane Becker, equity analyst at Cowen and company.

BLACKROCK: The world’s largest asset manager is expected to report a profit of $8.66 in the fourth quarter, which represents a year-over-year change of more than +3%, with revenues forecast to grow over 7% year-over-year to $4.27 billion.

“We believe BlackRock is best positioned on the asset management barbell given leading iShares ETF platform, multi-asset & alts combined with technology/Aladdin offerings that should drive 10% EPS CAGR (2020-22e) via 5% average long-term organic growth & continued op margin expansion. We see further growth ahead for Alts, iShares, international penetration, and the institutional market in the US,” said Michael Cyprys, equity analyst at Morgan Stanley.

“We expect the premium to widen as BlackRock takes share in the midst of market dislocation and executes on improving organic revenue growth trajectory.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 14

Ticker Company EPS Forecast
DAL Delta Air Lines -$2.47
BLK BlackRock $8.66
TSM Taiwan Semiconductor Mfg $0.94
FRC First Republic Bank $1.52
PRGS Progress Software $0.78

 

Friday (January 15)

IN THE SPOTLIGHT: CITIGROUP, WELLS FARGO

CITIGROUP: New York-based diversified financial services holding company is expected to report a profit of $1.30 in the fourth quarter, which represents a year-over-year slump of more than 30%, with revenues forecast to decline about 10% year-over-year to $16.5 billion.

Citi is trading at just 0.7x NTM BVPS implying a through the cycle ROE of just 7%, well below our 9% estimate for 2023. While there is uncertainty around how much Citi needs to invest in technology to address the Fed and OCC consent orders around risk management, data governance and controls, we believe the stock is cheap even if expenses remain elevated. We have modelled in expenses rising to $44B for 2021 and 2022 well above $42B in 2019,” noted Betsy Graseck, equity analyst at Morgan Stanley.

“Moreover, Citi is not getting credit for its diversification (only 40% of total loans are consumer and only half of those are credit card). Citi also has a more resilient wholesale business, skewed to FX, EM and cash management.”

WELLS FARGO: The multinational financial services company is expected to report a profit of $0.58 in the fourth quarter, which represents a year-over-year slump of more than 30%, with revenues forecast to decline about 9% year-over-year to $18 billion. Seaport Global Securities also issued estimates for Wells Fargo & Company’s Q2 2021 earnings at $0.60 EPS and FY2022 earnings at $3.10 EPS.

“Net interest income is anticipated to be $40 billion for 2020, lower than the previous guidance due to lower commercial loan balances and higher MBS premium amortization. Management expects fourth-quarter origination volume to be similar to third-quarter levels despite typical seasonal declines and fourth-quarter production margins should remain strong,” noted analysts at ZACKS Research.

“The company expects internal loan portfolio credit ratings, which were also contemplated in the development of allowance, will result in higher risk-weighted assets under the advanced approach and under the standardized approach in the coming quarters, which would reduce CET1 ratio and other RWA-based capital ratios.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 15

Ticker Company EPS Forecast
VFC VF $0.90
JPM JPMorgan Chase $2.56
C Citigroup $1.30
WFC Wells Fargo $0.58
PNC PNC $2.59
HDB Hdfc Bank $0.54

 

Earnings to Watch Next Week: Carnival, RPM, Constellation Brands and Walgreens Boots Alliance in Focus

Earnings Calendar For The Week Of January 4

Monday (January 4)

IN THE SPOTLIGHT: CARNIVAL

Carnival, the world’s largest cruise ship operator, is expected to report a loss for the third consecutive time in the fourth quarter. The Miami, Florida-based company’s revenue will plunge ​nearly 100% to $142.09 million from $4.78 billion posted in the same period a year ago. Carnival is expected to report a loss of $1.84 per share, worse compared to a profit of 62 cents per share registered in the same quarter last year.

“We think the cruise industry will be one of the slowest sub-sectors to recover from the COVID-19. Cruising needs just not international travel to return, but ports to reopen, authorities to permit cruising, and the return of customer confidence,” said Jamie Rollo, equity analyst at Morgan Stanley.

“We expect cruising to resume in January 2021, and only expect FY19 EBITDA to return in FY24 given historically CCL has lacked pricing power, and EPS to take even longer given dilution of share issues and higher interest expense. We see debt doubling in FY21 vs FY19 due to operating losses and high capex commitments, and leverage looks high at 4-5x even in FY23-24e, so we see risk more equity might need to be raised,” Rollo added.

According to the mean Refinitiv estimate from eleven analysts, Carnival Corp is expected to show a decrease in its fourth-quarter earnings to -186 cents per share. Wall Street expects results to range from a loss of $-2.10 to ​a loss of $-1.64 per share, Reuters reported.

Tuesday (January 5)

No major earnings scheduled for release.

Wednesday (January 6)

IN THE SPOTLIGHT: RPM INTERNATIONAL

RPM International, manufacturer of specialty chemical product lines, including high-quality specialty paints, protective coatings, roofing systems, sealants, and adhesives, is expected to report a profit of $1.0 in the fiscal second quarter of 2021, up from $0.76 reported in the same quarter last year.

The specialty chemicals company’s revenue could grow more than 4% year-on-year to $1.46 billion.

“Nearly 1/3 of sales are related to U.S. housing and home improvement (the second highest in the industry behind Sherwin-Williams). This continues to be our preferred coatings end market as it benefits from COVID-19 driven home improvement demand, which we think is sustainable. Importantly, RPM has no meaningful auto, aerospace exposure, but does have US infrastructure/construction exposure which could benefit from stimulus policy,” noted Vincent Andrews, equity analyst at Morgan Stanley.

“RPM’s MAP self-help program offers an offset to COVID-19 challenges. Meaningful opportunity remains for improvement in margins, free cash flow conversion, and return of capital to shareholders. Management highlighted upside to MAP targets on the recent conference call,” Andrews added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 6

Ticker Company EPS Forecast
RPM RPM International $1.00
MSM MSC Industrial Direct $1.08
UNF UniFirst $1.68
AUOTY AU Optronics $0.09

Thursday (January 7)

IN THE SPOTLIGHT: CONSTELLATION BRANDS, WALGREENS BOOTS ALLIANCE

CONSTELLATION BRANDS: New York-based Fortune 500 international beverage alcohol company is expected to report a profit of $2.40 in fiscal third quarter, up from $2.14 per share seen in the same quarter a year ago, which would indicate a positive year-over-year growth rate of more than 12%.

The leading beverage alcohol company’s revenue could grow more than 12% year-on-year to $2.26 billion.

“We believe the focus of Constellation Brands’ FQ3 EPS will be on accelerating and above consensus beer depletions to +8.3% y-o-y in FQ3 (vs. 5% in F1H21) with improving beer out-of-stocks, as well as a beer shipment recovery after the under-shipment in F1H21. We also expect an update on beer depletion trends in December, with solid U.S. scanner data trends but likely weakening on-premise trends with more on-premise restrictions, particularly in California (about a quarter of Constellation Brands’ volumes),” said Dara Mohsenian, equity analyst at Morgan Stanley.

“Additionally, we believe investors will focus on beer margins, which we believe could surprise to the upside in FQ3 (we are 20 bps above consensus on beer margins and 2.3% above consensus on beer profit) and in F2H21, with Constellation Brands full year FY21 guidance of flat beer margins implying -160 bps of y-o-y margin declines in H2, with our estimates above guidance at -20 bps y-o-y,” Mohsenian added.

WALGREENS BOOTS ALLIANCE: The largest U.S. drugstore chain is expected to report a profit of $1.03 in fiscal first quarter ended November 2020, representing a year-over-year plunge of -25.6%. The retail pharmacy provider’s revenue could grow about 2% year-on-year to $34.93 billion.

“When Walgreens provided 2021 guidance back on October 15th, management didn’t include any negative impact from additional lockdown measures in Europe or changes to utilization patterns in the US including higher demand for flu vaccines in 1Q but softer demand for cough, cold, and flu products. To reflect how the environment has changed, we have updated our estimates. For 1Q, we now model EPS of $0.98 from $1.14 prior and versus consensus’ $1.03 (range $0.97 – $1.08). Our changes are primarily driven by our estimate of international retail segment sales down -20% y/y and -4.5% sequentially,” said Ricky Goldwasser, equity analyst at Morgan Stanley.

“While we are lowering our 2021 estimate to $4.55 from $4.70, our numbers include only the additional hiring of pharmacy technicians throughout the year but not the benefit associated with administrating the vaccines to the general populations. We think the benefit could be as high as a $1.00 – $1.40 split between 2HF21 and 1HF22. In comparison, the consensus is $4.82 and guidance of low single-digit y/y growth implies a $4.78 to $4.87 range.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 7

Ticker Company EPS Forecast
STZ Constellation Brands $2.40
WBA Walgreens Boots Alliance $1.03
CAG Conagra Foods $0.73
HELE Helen Of Troy $3.01
AYI Acuity Brands $1.83
BBBY Bed Bath & Beyond Inc. $0.17
MU Micron Technology $0.69
DCT DCT Industrial Trust -$0.01
WDFC Wd 40 $0.87
PSMT PriceSmart $0.67

Friday (January 8)

No major earnings scheduled for release.

Earnings to Watch in Holiday-Shortened Week: Heico, Carnival, CarMax, Cintas and Weibo in Focus

Monday (December 21)

IN THE SPOTLIGHT: HEICO, CARNIVAL

HEICOHeico, an aerospace and electronics company, is expected to report a profit of $0.42 in the fourth quarter, down from $0.62 per share seen in the same quarter a year ago. The Hollywood, Florida-based company will post a more than 20% decline in revenue to $414.782 million from $ 541.53 million a year ago.

CARNIVALCarnival, the world’s largest cruise ship operator, is expected to report a loss for the third consecutive time in the fourth quarter. The Miami, Florida-based company’s revenue will plunge ​nearly 100% to $142.09 million from $4.78 billion posted in the same period a year ago. Carnival is expected to report a loss of $1.86 per share, worse compared to a profit of 62 cents per share registered in the same quarter last year.

“We think the cruise industry will be one of the slowest sub-sectors to recover from the COVID-19. Cruising needs just not international travel to return, but ports to reopen, authorities to permit cruising, and the return of customer confidence,” said Jamie Rollo, equity analyst at Morgan Stanley.

“We expect cruising to resume in January 2021, and only expect FY19 EBITDA to return in FY24 given historically CCL has lacked pricing power, and EPS to take even longer given dilution of share issues and higher interest expense. We see debt doubling in FY21 vs FY19 due to operating losses and high capex commitments, and leverage looks high at 4-5x even in FY23-24e, so we see a risk more equity might need to be raised,” Rollo added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 21

Ticker Company EPS Forecast
HEI Heico $0.42
CUK Carnival -$1.84
CCL Carnival -$1.84
GCTAY Siemens Gamesa ADR $0.01
CCL Carnival -£1.39

Tuesday (December 22)

IN THE SPOTLIGHT: CARMAX, CINTAS

CARMAX: CarMax, America’s largest used-car retailer and a Fortune 500 company, is expected to report a profit of $1.14 per share in the fourth quarter, up from $1.04 per share reported in the same quarter a year ago. Revenues are expected to be $5 billion, rising more than 4% from the year-ago quarter.

William Blair upgraded their earnings per share forecasts to $1.29 for Q4 2021, up from the previous $1.26. The Chicago-based investment bank also forecasts FY2023 earnings at $6.15 EPS.

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect Carmax to successfully execute their Omnichannel strategy, providing both online and physical dealer options to the consumer,” said Adam Jonas, equity analyst at Morgan Stanley.

“Carmax has consistently generated profitability and has one of the strong balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing Carmax to achieve operating leverage, with upside from the omnichannel rollout,” Jonas added.

CINTAS: Mason-based corporate uniform maker Cintas is expected to report a profit of $2.17 per share in the second quarter fiscal 2021, lower than $2.27 per share reported in the same quarter a year ago. Revenue is forecast to decline to $1.75 billion from $1.84 billion.

“We expect COVID-19 to have an impact on CTAS, with the duration and lasting economic impact a key driver of the stock. Despite excellent execution and a strong track record of revenue growth and capital allocation, Cintas remains a cyclical company; we think risk-reward skews to the downside given the stock’s elevated multiple and the potential for uniform employment to remain muted especially if small businesses close,” said Toni Kaplan, equity analyst at Morgan Stanley.

“MS economists are forecasting an extended period of lower employment and CTAS’ top-line growth could become challenged if labour growth stays under pressure,” Kaplan added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 22

Ticker Company EPS Forecast
KMX CarMax $1.14
NEOG Neogen $0.31
CTAS Cintas $2.17
ACI AltaGas Canada $0.41
HOCPY Hoya Corp $0.74

Wednesday (December 23)

Ticker Company EPS Forecast
PAYX Paychex $0.66
AUOTY AU Optronics $0.09

Thursday (December 24)

Ticker Company EPS Forecast
ASEKY Aisin Seiki Co $0.42
RLAY Relay Therapeutics Inc. -$0.32

December 25-January 1

IN THE SPOTLIGHT: WEIBO

No major earnings scheduled for release during this period. However, Chinese microblogging website Weibo Corporation will announce its unaudited financial results for the third quarter of 2020 before the market opens on Monday, December 28, 2020.

China’s biggest social media platforms Weibo is expected to report a profit of 61 cents​ per share according to the mean Refinitiv estimate from twelve analysts. Wall Street expects results to range from 57 cents to ​65 cents per share, Reuters reported.

“Weibo is affected by macro and competitive headwinds that have been pressuring other online ad platforms, including Baidu, iQIYI and Sohu, which could linger – it may take time to recover. We think the structural challenge from ad inventory increase across the industry will be hard to mitigate in the near term,” said Alex Ko, equity analyst at Morgan Stanley.

“We await more visibility on ad demand recovery and Weibo’s monetization progress amid healthy user momentum. Our price target implies 15x P/E on our 2021 non-GAAP EPS forecast vs. the historical trough of 12x, given earnings growth trajectory,” Ko added.

Pfizer Vaccine Breakthrough Boosts Markets

Pfizer And BioNTech Report Great Results From Their Large-Scale Study Of COVID-19 Vaccine

S&P 500 futures have recently received a major boost after Pfizer and BioNTech COVID-19 vaccine was found to be more than 90% effective in the first analysis of the large study.

Vaccine news provided significant support to stocks, and S&P 500 futures are gaining more than 4% in premarket trading. Not surprisingly, shares of vaccine developers are gaining a lot of ground ahead of the market open – Pfizer shares are up by 12% while BioNTech stock is up by more than 23%.

Meanwhile, WTI oil managed to return back above the $40 level as vaccine news increased hopes for a successful rebound of oil demand. At the same time, precious metals like gold and silver are under pressure as traders dump safe haven assets amid optimism about the vaccine.

Stay-At-Home Stocks Suffer On Vaccine News

While the vaccine news are positive for most stocks, shares of some companies are under major pressure in premarket trading.

Zoom and Peloton, which were one of the major winners during the pandemic, are down by almost 13%, and even Amazon is under pressure in premarket trading. As a result of the pressure on stay-at-home stocks, the tech-heavy Nasdaq is set to open higher by a modest 0.5%.

It remains to be seen whether vaccine news will trigger a real rotation from tech stocks into more cyclical stocks, but stay-at-home stocks will certainly have a very challenging trading session today.

Airline And Cruise Line Stocks Jump In Premarket Trading

Today, investors look ready to bet on beaten stocks like airlines and cruise lines. For example, American Airlines Group is up by 25% while Delta Air Lines  is gaining 18% in premarket trading.

Investors are even more optimistic about cruise lines like Carnival Corp. or Norwegian Cruise Line Holdings as an effective vaccine against COVID-19 may make the difference between bankruptcy and profitable business for these companies.

Traders should expect plenty of volatility in these stocks in the upcoming trading sessions as the market will try to find new price levels which take vaccine news into account.

For a look at all of today’s economic events, check out our economic calendar.

Royal Caribbean Cruises Rallies To 2-Month High

Royal Caribbean Cruises Ltd. (RCL) rose 16% last week despite reporting a Q2 2020 loss of $6.13 per-share, much worse than estimates for a $4.15 loss. Revenues plunged 93% year-over-year to a paltry $175.8 million, beating expectations by more than $17 million. The company had little good news during the August 10th release, warning the “magnitude, duration, and speed of COVID-19 remains uncertain” Even so, they noted that 2021 bookings have improved to ‘historical trends’.

Royal Caribbean Cruises Pandemic Headwinds

Cruise ship stocks got crushed in the first quarter after on-board COVID-19 infections forced a number of ships to quarantine passengers at harbors around the world. The industry then shut down with other travel sectors and has failed to reopen, due to continued worries about closed ventilation systems. U.S., Europe, and Australia-based operations have extended shutdowns to October 31st but most aren’t expected to sail again until 2021.

Royal Caribbean Cruises Chairman and CEO Richard D. Fain discussed major headwinds in the release, advising “the COVID-19 pandemic is posing an unprecedented challenge to our industry and society. Our teams are working tirelessly to return to service soonest and doing so by developing new health and safety protocols to protect the well-being of our guests, crew and destinations we visit.” “In the meantime, we are using this time to refine our operations to be as efficient as we can while providing the great experiences that so many people are eagerly awaiting.”

Wall Street And Technical Outlook

Wall Street consensus didn’t budge after the quarterly report, with a ‘Moderate Buy’ rating based upon 7 ‘Buy’, 8 ‘Hold’, and just 2 ‘Sell’ recommendations. The mix looks highly unrealistic, given the possibility that the company will run out of lending facilities and be forced to declare bankruptcy.  Price targets currently range from a low of $35 to a street-high $75 while the stock closed Friday’s session about $6 above the median $54 target. This lofty placement suggests it’s more than fully-valued at this time.

Royal Caribbean Cruises faces major technical hurdles despite last week’s rally because it’s still trading well below the 200-day moving average, which was broken on heavy volume in February.  The first quarter swoon also broke a three-year topping pattern, establishing heavy resistance in the upper 80s. Buying volume offers the only bright spot in this otherwise bearish scenario, with heavy bottom fishing and short covering lifting accumulation readings near all-time highs.

Carnival Stock Sinks After Wedbush Slashes Price Target

Carnival Corporation & Plc (CCL) sank 5.45% Monday after Wedbush cut its price target on the embattled cruise operator’s stock from $29 to $20 while reiterating a ‘Neutral’ rating. However, the revised target still implies a 31% upside from Monday’s $15.28 close.

Despite Carnival announcing last week that several of its AIDA cruises will recommence sailing in August and that it continues to see demand from new bookings next year, analyst James Hardiman sees trouble on the horizon amid increasing COVID-19 cases in the United States.

“While a legitimate target for the restart of the AIDA brand is encouraging, we can’t help but think that we remain a far distance away from operations resuming in the United States given a resurgence in COVID-19 cases as well as halted (in some instances reversed) economic reopenings,” Hardiman said, per MarketWatch.

Through July 13, Carnival stock has a market capitalization of $11.95 billion and trades nearly 70% lower on the year. Although, the shares have fared much better over the past three months, clawing back 30%. Earlier this year, the company suspended its dividend and share buyback programs to improve its liquidity position.

Reducing Fleet Size

Carnival, which operates over 100 vessels across nine brands, said it expects to reduce its fleet by 13 ships, representing nearly 9% of its total capacity. The company sold one of its ships last month and has agreements to offload another five. It also has preliminary sale agreements for three vessels and previously announced transactions for four other ship removals. The move creates a more efficient company to navigate the unchartered waters of the ongoing pandemic.

Wall Street View

Analysts overwhelmingly remain on the sidelines, with the stock receiving 12 ‘Hold’ ratings. This is hardly surprising, given the uncertainty surrounding sailing schedules and passenger demand in 2021 and beyond. The stock also has 7 ‘Buy’ ratings and 4 ‘Sell’ ratings. Street price targets range from as low as $9.93 to as high as $27.

Technical Outlook

Since running into resistance at the 100-day simple moving average (SMA) in early June, Carnival shares have retraced back down to the $14.5 level, where price finds vital support from a horizontal trendline. Providing the stock can hold steady in this area, look for a test of the June 8 high around $25. Alternatively, if a breakdown below $14.5 occurs, anticipate a decline to the next key area of support at $11.50.

CCL Chart

Choppy Trading in Europe, Carnival Seeks Credit

Then again, the US’s situation is far worse in comparison with here, so perhaps it won’t come to that. Prime Minister Johnson said that now is not the time to step back in relation to the economy. Mr Johnson wants to double down on spending on technology, infrastructure and education. Like other governments, the strategy is to throw money at the problem.

Grainger confirmed that it has issued a £350 million bond at a coupon rate of 3% for 10 years. The funds will be used to pay down a £200 million bank facility as well has increase its housing stock. The property specialist raised £187 million in February from an equity offering. In today’s update, Grainger also said that business has been performing well since it released its half year figures last month. In May, 96% of rents were collected on time, which was a slight improvement on April and March’s readings, which were 94% and 95% respectively. Occupancy rates held steady at 97%.

Carnival has announced term loans of $1.86 billion and €800 million. The debt instruments will have maturities of five years. The $1.86 billion tranche will be issued at 96% of its face value and the interest on it will be adjusted LIBOR, with a 1% floor, plus 7.5%. The €800 million will also be issued at 96% of its face value, and the interest will be ERUIBOR, with 0% floor, plus 7.5%. The cash raised will be used for general corporate purposes, such as paying down other debts.

Hunting, a supplier to the energy industry, issued a downbeat trading update. In light of the sharp fall in the oil market in March, the company said that most of its businesses in the second quarter saw a decline in activity. Titan, the group’s energy services division, saw a 40% fall in first half revenue on an annual basis. As a reaction to what has gone on in the oil and gas sector, the company cut its headcount by 25% and the restructuring will be completed this month. Cost savings has been in the region of $60 million. The capital expenditure budget has been cut by 50%.

Wirecard shares have soared today on chatter that Worldline, the French payments group, might seek to buy parts of the struggling company. Trading in Wirecard shares has been choppy recently as the company filed for insolvency last week.

British Airways, which is a part of the International Consolidated Airlines Group, announced in April it will cut up to 12,000 jobs. It was reported over the weekend that 350 pilots will be let go, and 300 will be added to a pool for re-hiring, if or when business picks up again.

Last year, Prime Minister Johnson, said all of the UK would have superfast broadband by 2025, but BT Group feel that target will be difficult to achieve. The pandemic has set the process back and there are concerns about Huawei too, as the company will play a role in the UK’s 5G network, but things might change in relation to The West’s relationship with China.

BP will offload its petrochemicals business to Ineos for $5 billion. The oil titan has achieved its $15 billion disinvestment plan one year ahead of schedule.

Barclays raised its price target for Unilever to 4,370p, from 4,310p.

EUR/USD and GBP/USD have been given a lift by the pullback in the US dollar. The greenback pushed up at the end of last week as it attracted risk-off flows. UK consumers are keen to pay down debt as the Bank of England consumer credit report showed that £4.59 billion debt was paid down in May. UK mortgage lending last month was £1.2 billion, which was a big improvement from the £292,000 posted in April.

On Friday, Facebook shares tumbled as a number of companies said they would halt their paid advertising on social media platforms, and some of those firms specifically mentioned Facebook. Recently a number of anti-racist bodies have claimed that Facebook has not done enough to root out content that could be considered to be hateful, so the organisations have called for a boycott of the social media giant.

Major corporations such as Verizon and Unilever have decided to stop advertising on Facebook. The issue is gaining momentum so more firms will probably also turn their back on social media platforms. Twitter is likely to be in the spotlight too.

Micron Technology will be in focus as it will release its third quarter numbers tonight after the close of trading in the US. The group’s second quarter numbers were well received as EPS were 45 cents, topping the 37 cents forecast. Revenue for the three month period was $4.8 billion, exceeding the $4.69 billion consensus estimate.

In May, the company raised its guidance. It now expects third quarter revenue to be $5.2-$5.4 billion, up from between $4.6 billion and $5.2 billion. The group expects EPS to be 75-80 cents. There has been an increase in demand for data centre space due to the surge in working-from-home. Server chips have seen a rise in popularity as retailers have been ramping up their – e-commerce exposure.

We are expecting the Dow Jones to open 135 points higher at 25,150, and the S&P 500 is called up 14 points at 3,023.

By David Madden (Market Analyst at CMC Markets UK)