What occurred

Shares of cruise line operator Royal Caribbean (NYSE:RCL) fell by 4.8% on Friday after the corporate reported a giant fourth-quarter earnings miss, and warned that its return to profitability will arrive later this 12 months than beforehand anticipated because of the omicron coronavirus surge. Its friends Carnival (NYSE:CCL) and Norwegian Cruise Line Holdings (NYSE:NCLH) acquired caught in its wake: Carnival inventory closed Friday down 1.9%, whereas Norwegian dipped by 1.1%

However that was final week. As this week begins, all three of those cruise shares are trying golden. As of 12:20 p.m. ET Monday:

  • Norwegian is up 6.4%;
  • Royal Caribbean is rising 7.4%;
  • And Carnival is citing the rear with a 5.7% acquire.


3 cruise liner ships lined up abreast in port.

Picture supply: Getty Photos.

So what

Final week, Royal Caribbean got here up wanting analysts’ expectations on earnings for This fall 2021, and administration warned that the fast unfold of the omicron variant of COVID-19 had reduce into demand for bookings within the first half of 2022. Consequently, “our return to profitability [will be postponed] by a couple of months,” mentioned the corporate. That in all probability signifies that the milestone the corporate had anticipated to succeed in in Q2, it will not attain till Q3.

Buyers clearly did not like listening to that. However on Monday, Stifel Nicolaus analyst Steven Wieczynski supplied a extra optimistic tackle the scenario, and his outlook seems to be floating all of the cruise corporations’ boats. As StreetInsider.com experiences, Stifel has solely needed to decrease its 2022/2023 earnings estimates “barely” due to “RCL’s … delayed … full return to service as a consequence of current variant headwinds.”

Greater than that: “We expect RCL and the remainder of the cruise operators are arrange exceptionally effectively heading into 2H22 given demand/pricing patterns proceed to strengthen and the chance round extra capital raises appears distant,” predicts Wieczynski.

Now what

And I’ve to say — I form of agree with the analyst on this one. On the one hand, the prospect of one other quarter’s delay to profitability at Royal Caribbean — and doubtless on the different cruise operators as effectively — is disappointing. However Royal Caribbean did say final week that the disruption brought on by the omicron COVID-19 wave is simply a “short-term operational problem.” Administration nonetheless expects to be again working inside historic ranges by the second half of this 12 months, and for its enterprise to be each worthwhile and working money movement constructive. 

This in all probability will not occur quick sufficient to show Royal Caribbean worthwhile for 2022, admits Stifel — and in accordance with analysts polled by S&P International Market Intelligence, it will not occur quick sufficient for Carnival or Norwegian to be worthwhile for this 12 months, both. But when profitability returns within the second half, and may be maintained, there’s each purpose to hope that this trade can be again within the black by 2023, and no later.

This text represents the opinion of the author, who might disagree with the “official” advice place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even one in every of our personal — helps us all suppose critically about investing and make choices that assist us grow to be smarter, happier, and richer.


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