Panmure keeps 'sell' rating on Carnival despite Q1 beat

26th Mar 2014 10:12

Panmure Gordon has maintained a 'sell' rating on cruise operator Carnival despite the company's first-quarter results coming in ahead of expected.Carnival said on Tuesday that net revenue yields in the first three months of the year fell by just 2.1% year-on-year, compared with earlier guidance for a 3-4% decline. Panmure said this reflects the "strong recovery of the Carnival brand".Meanwhile, a lower-than-anticipated increase in costs meant that earnings per share (EPS) were flat for the quarter, better than guidance for a loss of between 8-11 cents.The company also narrowed its guidance for full-year EPS from $1.40-1.80 to $1.50-1.70."Despite this improvement in first-quarter trading, the guidance range has only been narrowed [...] with management still expecting a full-year net revenue yield decline, with costs slightly up year-on-year reflecting the significant capacity increase in the Caribbean, in addition to difficult trading in Japan," Panmure said. "We continue to believe Carnival is likely to see a protracted recovery in net revenue yields."The broker has therefore held its EPS forecasts for the current year at $1.51, though estimates for 2015 have been raised to reflect a better yield performance from the Carnival brand.Panmure, which retained its negative stance on the stock, said: "In our view, Carnival continues to struggle due to older ships, limited online penetration and controlled distribution. With a protracted recovery likely in net revenue yields, better value exits elsewhere in the travel and leisure space."The 1,770p target price was left unchanged.The stock was trading down 1.8% at 2,302p by 10:27 on Wednesday.BC