Carnival (CCL) Stock Down on Cruise Suspension Extension

Carnival Corporation & Plc CCL recently extended the suspension of operations of cruises in North America through Sep 30, 2020 due to the coronavirus pandemic. Following the news, the company’s shares declined 3.4% yesterday. Year to date, the company’s shares have fallen 66.1%, compared with the industry’s decline of 47.1%.

The company, which had initially suspended the cruise operations on Mar 13, 2020 for 30 days, has now extended the suspension of operation for the third time.

Carnival Cruise Line president Christine Duffy said “During this unprecedented pause in our business, we have continued to assess the operating environment and confer with public health, government and industry officials.”

The cruise industry has been driven to a standstill by the coronavirus-induced crisis. Carnival has been no exception to trend with the crisis hurting operations and global bookings. The company also believes that the pandemic is likely to cause delay in ship deliveries as the shipyards have been impacted as well. The company is unable to definitively predict when its cruise operations, which have been halted for more than two months, will return to normal operations. Notably, management has been unable to provide a guidance owing to the same.

As of May 31, 2020, cumulative advanced bookings for 2021 capacity currently available for sale are within historical ranges at prices that are down in the low to mid-single digits range, which includes the negative yield owing to FCCs and onboard credits applied, on a comparable basis. However, for 2021, booking volumes for the six weeks ending May 31, 2020, were down significantly compared with the prior year. Other major cruise operators like Norwegian Cruise Line Holdings Ltd. NCLH and Royal Caribbean Group RCL have also been affected.

Enough Liquidity to Tide over Pandemic

Carnival has ample liquidity, which will help it survive in an extended zero revenue scenario for some time. The company exited the fiscal second quarter with liquidity of $7.6 billion. The company has $8.8 billion of committed export credit facilities, which are available to fund ship deliveries originally planned through 2023. Amid the coronavirus-induced shutdowns, the company’s average cash burn rate for the second half of 2020 is anticipated to be nearly $650 million. Moreover, the company has preliminary agreements for the disposal of six ships.

Zacks Rank & a Key Pick

Carnival has a Zacks Rank #4 (Sell). A better-ranked stock in the leisure space is Camping World Holdings, Inc. CWH , which carries a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Camping World Holdings current year earnings is likely to witness growth of 193.9%.

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