Broker snap: Panmure says Carnival is a 'serial disappointer'

21st May 2013 09:29

Shares in Carnival sunk on Tuesday morning after the cruise operator issued a profit warning, prompting Panmure Gordon to slash its forecasts and keep a 'sell' rating.The company now expects to report a full-year earnings per share (EPS) of $1.45-1.65 in 2013, well below earlier guidance of $1.80-2.10, as net revenue yields are now forecast to fall 2-3% compared with previous guidance for a flat reading.Panmure said that this reflects significant price reductions which have not been offset by a high-enough increase in volumes, which means that the company could struggle to regain pricing power in the future.The broker said: "Carnival has been a serial disappointer with consensus earnings falling from $2.49 at the end of September 2012. Taking the mid-point of the new guidance this implies a 38% fall to consensus and yet the shares have risen 6.0%. "This appears nonsensical to us and the market must begin to appreciate there are structural as well as cyclical challenges to the Carnival business model. We think Carnival will struggle to regain pricing power over the next 12-18 months."Panmure has cut its 2013 EPS estimate from $1.92 to $1.45 - "at the bottom of the revised range given the continual downgrades" - and reduced its 2014 forecast from $2.20 to $1.69."We reiterate our long-standing 'sell' recommendation and 1,770p target price implying c27% potential downside."The stock was down 12.9% at 2,099p by 10:05.BC