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Berenberg downgrades Carnival on weaker 2020 outlook
27th Sep 2019 10:44
(Sharecast News) - Berenberg downgraded its stance on shares of cruise operator Carnival to 'sell' from 'hold' on Friday, pointing to a weakening outlook for 2020 following a profit warning the day before.
On Thursday, Carnival downgraded its adjusted earnings per share guidance for 2019 to between $4.23 and $4.27 from a previous range of $4.25 to $4.35 as it said highlighted the impact of higher fuel prices.
The bank, which cut its price target on the stock to 3,100p from 3,800p, said a combination of the weaker operational outlook and higher fuel costs result in its earnings per share estimate for 2020 coming down to $4, an 11% drop.
"When we downgraded Carnival on 28 June 2019, we saw a fine balance between the macro risks and the company's optically cheap valuation," Berenberg said.
"The Q319 results have heightened our fears, and with the shares down by just 2% from when we downgraded, we believe the time is right to take the shares to sell."
It added that while a valuation of 9.5x 2020F price-to-earnings multiple is a material discount to the long-run average, its concerns about earnings and the risk from a flagging booking environment justify the downgrade decision.
At 1040 BST, the shares were down 1.5% at 3,340p.
On Thursday, Carnival downgraded its adjusted earnings per share guidance for 2019 to between $4.23 and $4.27 from a previous range of $4.25 to $4.35 as it said highlighted the impact of higher fuel prices.
The bank, which cut its price target on the stock to 3,100p from 3,800p, said a combination of the weaker operational outlook and higher fuel costs result in its earnings per share estimate for 2020 coming down to $4, an 11% drop.
"When we downgraded Carnival on 28 June 2019, we saw a fine balance between the macro risks and the company's optically cheap valuation," Berenberg said.
"The Q319 results have heightened our fears, and with the shares down by just 2% from when we downgraded, we believe the time is right to take the shares to sell."
It added that while a valuation of 9.5x 2020F price-to-earnings multiple is a material discount to the long-run average, its concerns about earnings and the risk from a flagging booking environment justify the downgrade decision.
At 1040 BST, the shares were down 1.5% at 3,340p.