Carnival Cruise Lines Tragic Accident and A Possible Trade Idea

Greetings,

By now we have all heard of the tragic accident of the Costa Cruise Line and its parent company Carnival Cruises (CCL) last trade $29.60, down 13.6% on Seven times the average daily volume.

The loss of life and the lawsuits that will follow combined with what may be a total loss of the $650 million dollar ship will leave this company with some stiff headwinds going forward as they try to start over with one less ship and perhaps a brand name that is slightly tarnished. Carnival Cruises is the largest company in the cruise industry and is expected to survive this nightmare but in the meantime the stock may very well remain under pressure in the months ahead.

We have spoke before on trading stocks during earnings season and how sometimes a smart trade is one that is made on another stock in the industry group after a good or bad earnings report as many times stocks in the same industry group will trade in the same direction as the headline stock. With that said today I would like to bring to your attention another stock in the cruise ship business that was punished by the Carnival news yesterday.

Royal Caribbean Cruises Ltd. – (RCL) last trade $26.97, down 6% on Three times average daily volume. Royal Caribbean Cruises Ltd. is a global cruise vacation company that operates Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club
Cruises, CDF Croisieres de France, and TUI Cruises through a 50% joint venture. The company has a combined total of 40 ships in service and two under construction. It also offers unique land-tour vacations in Alaska, Asia, Australia, Canada, Europe, Latin America and New Zealand.

Key Stats:

10 day average daily volume – 4.6 mil.

Shares outstanding – 217.3 mil.

Market Cap. – 5.9 Bil.

P/E – 9.6

Earnings due – January 23 – Expected EPS growth (-25%) – 0.15 vs 0.20

The profit margins in this industry are razor thin so we can not rule out a dip below the $25 level and should allow earnings to come out first, but this stock seems to have been punished yesterday because of the troubles at Carnival.

“Leaders who win the respect of others are the ones who deliver more than they promise, not the ones who promise more than they can deliver.” Mark A. Clement (born 1955)

That is all for now and as always I welcome your questions and comments.

Best Wishes, $$$, ET.

Equity Trader.me