Why Carnival, Royal Caribbean and Norwegian Cruise Line shares sank today

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What happened

It’s Thursday, the day after Hurricane Ian landed in Florida – and cruise line stocks are suffering.

As of 10:30 a.m. ET, shares of Norwegian Cruise Line Holdings (NCLH -4.00%) lost 4.7% of their value, carnival society (CCL -4.48%) is down 5.2%, and Royal Caribbean (RCL -4.86%) leads the sector down with a loss of 5.5%.

So what

The hurricane is the obvious catalyst for today’s stock meltdown. According to the Cruise Industry News website, several cruise lines, including Carnival and Norwegian, as well as other companies such as disney and MSC – canceled cruises prior to Ian’s arrival. On the positive side, Port Canaveral is expected to be open for business again as early as Friday – but depending on the damage to the area, this could change, and further cancellations or delays cannot be ruled out.

Nor is Ian the only catalyst affecting cruise passengers today.

As my fellow jerk Rick Munarriz pointed out on Tuesday, this week is the week Carnival Corporation will release its third quarter 2022 results — Friday, in fact. Rick struck an optimistic note in his report, highlighting how some analysts are predicting the end of Carnival’s long losing streak, and that at least one analyst has recently raised its price target on the stock – while even analysts pessimists predict that Carnival will lose a plot less money in Q3 2022 than it has lost in each of the past four quarters.

But if good news is possible tomorrow, you also cannot rule out the possibility of bad news or bad directives.

Now what

According to the consensus of analysts who follow the stock, Carnival is still the most likely to report a loss on Friday – extending its losing streak to 11 straight quarters. In effect, more analysts believe Carnival will continue to lose money for three more quarters before returning to profitability, in the third quarter of 2023. If Carnival confirms those fears with its guidance on Friday, it could upset many apple carts — not just Carnival. , but also for Royal Caribbean and Norwegian Cruise investors.

Consider: Consensus estimates call for Norwegian Cruise to post a loss when it reports third-quarter results Nov. 1, but return to profitability three quarters later — a quarter earlier than Carnival. And analysts believe Royal Caribbean may actually be reporting a profit next month for his Q3! If Carnival delivers better-than-expected news tomorrow, analysts could feel confirmed in their optimism, helping lift the entire cruise industry. But if Carnival signals a loss — or, worse yet, warns that losses will continue to come — then the damage won’t be limited to Carnival.

With cruising stock prices plummeting today, it appears to be the risk investors are battening down the hatches against.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.

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