Arnold Donald’s Strong Stance In The Face Of Various Headwinds
There’s a clear pattern to initial market response to 2016 cruise company earnings reports.
Every quarter at least one of the publicly traded cruise companies reports and promotes what they describe as being good or better results, and provides upbeat statements about their outlook.
Investors and analysts often look at the same data differently, and stock prices languish.
No wonder Carnival Corp. President & CEO Arnold Donald opened the Q3 earnings call with a strong and determined pitch.
“Despite a series of geopolitical events that unfolded as the year progressed, including Turkey, Paris and Brussels, despite heightened concerns around Zika, around Brexit, and around China, despite fuel and currency both working against us… we have exceeded the high end of our quarterly guidance and we are raising our expectations for the year.”
During the quarter, he continued, Carnival Corp. delivered the highest quarterly earnings in company history with record net income of over $1.4 billion. “Despite the numerous headwinds we are well on track to achieve our new guidance.”
Despite all of Donald's "despites," Carnival Corp. stock traded lower on Monday - a 1.67% drop-off.
The dip reflected concerns about perceived overcapacity in China. Indeed, the majority of the earnings call Q & A session involved issues about capacity changes and pricing in China. The industry has a 31% capacity increase planned for China in 2017 and Carnival Corp. reported that yields in China remain negative year over year.
But things turned around Tuesday as Carnival stock rose 4.05%, more than making up for Monday’s loss. Reports from many financial houses on Tuesday morning were among the most positive we’ve seen this year.
Finally, strong statements from Donald addressing basic market concerns seem to be resonating: “We’ve seen no material impact from Zika,” he said as one example. “We didn’t get any cancellations or they’re not enough to mention.”
So the next few weeks could see a much-awaited turnaround in the frustrating cruise stock story of 2016.
Looking forward, Donald said booking trends are strong heading into 2017. He cited “continued strength in close-in pricing in the Caribbean and continued: "All of our major brands in North America and Europe experienced net revenue yield improvements despite the geopolitical environment in Europe.”