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Carnival stock plunges after stock supply plans and increased ship disposals

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The shares of Carnival Corp. fell on Tuesday, helping push down its peers’ shares, after the cruise operator disclosed plans for a $ 1 billion share offering and accelerated capacity cuts as it deals with the negative effects of the COVID-19 pandemic on its operations.

The company also said it hit a net loss of nearly $ 3 billion in the third quarter, including more than $ 900 million in losses on ship sales and write-downs.

CCL stock,
-10.75%
fell 9.3% in afternoon trading, enough to be the biggest percentage decline on the New York Stock Exchange. Trading volume was 64.2 million shares, enough to make the stock the fourth most actively traded on the NYSE, and well above the full-day average of around 36.9 million. ‘actions.

Carnival previously filed a prospectus with the Securities and Exchange Commission under which it could sell up to $ 1 billion of its common stock. Based on current prices, this could represent around 60.4 million shares, or around 10.1% of the shares outstanding.

The company plans to use the proceeds from a potential share sale for general purposes.

Carnival also said it now plans to divest 18 cruise ships in fiscal 2020, representing 12% of the company’s capacity, up from previous expectations that it would have 13 ships. The new phase-out plan includes the eight ships that have already left the fleet and is part of its plan to become a lighter, more efficient business.

The company also revealed on Tuesday that it recorded a net loss of $ 2.9 billion in the fiscal third quarter, which ends in August, after net profit of $ 1.8 billion in the same period it a year ago. Excluding non-recurring items, such as losses on ship sales and write-downs and restructuring charges, the adjusted loss would be $ 1.70 billion.

The FactSet consensus for net losses was $ 1.66 billion.

Separately, the company said the average monthly consumption rate for the third quarter was $ 770 million, which was in line with its forecast. For the fourth quarter, Carnival expects the average monthly consumption rate to decline to $ 530 million.

Stocks of other cruise ship operators fell in sympathy with Carnival, despite a rally in the broader stock market.

FactSet, MarketWatch

Royal Caribbean Group shares RCL,
-4.58%
slipped 3.0% and NCLH stock of Norwegian Cruise Line Holdings Ltd.
-4.60%
throw 2.5%. Meanwhile, SPDR Consumer Discretionary Select Sector’s XLY exchange-traded fund,
+ 0.82%,
of which Carnival, Royal and Norwegian stocks were all constituents, rose 1.1% and the S&P 500 SPX index,
+ 0.52%
increased by 0.6%.

Brandt Montour, an analyst at JP Morgan, said Royal Caribbean’s CFO appeared optimistic about progress in discussions with the Centers for Disease Control and Prevention (CDC) regarding CDC’s latest browsing ban order. In mid-July, the CDC extended its sailing ban order until September 30 from July 24, amid concerns of a further increase in COVID-19 cases.

Read more: Cruising stocks are dropping as the CDC extension of the sail-less order may just be the start.

In a presentation at the JP Morgans Forum on Gaming, Accommodation, Food and Leisure Management, Montour said Royal described his discussions with the CDC as incredibly constructive and said the CDC was very responsive, enough to make the company cautiously optimistic that the green light to start sailing. could come sooner rather than later.

As for the timeline, in the coming week the process of collecting feedback will be completed, and then the CDC should more formally assess the protocols, Montour wrote in a note to clients. [Royals] the current pose position should allow it to restart relatively quickly but with a moderately slow / measured capacity ramp from there.

As an indication, the correlation coefficients since the beginning of the year between the actions of carnivals and the actions of Royal Caribbean and Norwegian are 0.97, according to a MarketWatch analysis of FactSet data; a correlation of 1.00 would mean that the stocks are perfectly synchronized. In comparison, the correlation between the carnival stock and the S&P 500 is 0.62.

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