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Carnival shares shorted despite upbeat results

 

Tuesday, June 27, 2023

Today’s headlines

What’s happening: Shares of Carnival Corp fell on Monday following the release of its second-quarter results.

What happened: The cruise operator reported better-than-expected results for its second quarter.

However, the stock fell the most in over seven months after Carnival issued its cost forecast.

How were the results: The Miami, Florida-based company reported triple-digit growth in sales for its fiscal second quarter.

  • Sales jumped 104.5% year-over-year to $4.91 billion, beating the consensus estimates of $4.77 billion.
  • Adjusted loss for the quarter came in at 31 cents per share, narrower than the Wall Street expectations of 31 cents per share.

Why it matters: Investors were eagerly awaiting Carnival’s results for an insight into the current status of the travel industry after the sharp rebound following the pandemic.

Carnival’s Passenger Cruise Day surged 91.2% year-over-year to 21.8 million, while occupancy was 98% in the second quarter.

Selling and administrative expenses climbed 18.9% to $736 million. The company posted an operating income of $120 million for the latest quarter, versus a year-ago loss of $1.4 billion.

Carnival’s adjusted cruise costs, excluding fuel, were 13.5% higher than the pre-pandemic levels. Management also said the company’s full-year costs would be higher than previously projected.

The company increased its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortisation) guidance for fiscal 2023 to a range of $4.10 billion to $4.25 billion, from the previous forecast of $3.9 billion to $4.1 billion. Carnival also sees occupancy rates of 100% or higher for the year.

For the third quarter, management guided to adjusted EBITDA of $2.05 billion to $2.15 billion, with adjusted net income of $0.95 billion to $1.05 billion. The occupancy rate was projected at 107% or higher for the quarter.

How shares responded: Carnival’s shares tanked 7.6% to close at $14.60 on Monday, after the release of quarterly results. The stock has gained around 90% over the past six months.

What to watch: Traders will watch Carnival’s costs as well as global economic growth, both of which will have a significant impact on the company’s results ahead.

The markets today

The British pound will be in focus today after edging higher on Monday

Context: The GBP/USD forex pair settled slightly higher on Monday after recording losses last week.

Details: Forex traders started the week on a cautious note, following the Bank of England’s interest rate hike last week. The sterling shed more than 0.8% last week, recording its biggest weekly decline since mid-May after the British central bank surprised markets by increasing interest rates by half a percentage point.

Speculations are for the Bank Rate to peak at 5.50% next quarter, after an increase of 25 basis points at the BoE’s August and September meetings.

On the economic data front, the Confederation of British Industry’s monthly distributive trades index improved to -9 in June, compared to a reading of -10 in the previous month.

The GBP/USD forex pair rose slightly to 1.2714 on Monday, paring most of the gains recorded earlier in the session.

The British pound surged to a new seven-and-a-half year high versus the Japanese yen on Monday after Japan’s top currency diplomat Masato Kanda said action would be taken against the yen’s recent “rapid and one-sided moves. The yen, which is considered a safe-haven by forex traders, has been under significant selling pressure that took the Japanese currency to a 15-year low versus the euro on Monday.

What are expectations: With no major economic data due to be released today, traders will watch the performance of US dollar, which is expected to provide some direction to the sterling.

Markets await the release of economic data on GDP growth rate and current account from the UK on Friday. The British economy is expected to grow by 0.2% year-over-year in the first quarter, down from a 0.6% expansion in the earlier period. Analysts expect the current account deficit to widen to £5.5 billion in the first quarter, from £2.5 billion in the fourth quarter.

Other Markets: US trading indices closed lower on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.04%, 0.45% and 1.36%, respectively.

The news shaping the markets

Denmark’s government said it has started training Ukrainian pilots on F-16 jets. Despite the ongoing tensions, the safe-haven US dollar index fell slightly this morning.


Mexico’s economic activity rose by 2.5% year-over-year in April, surpassing market estimates of 2.3%, which lent support to the MXN/USD forex pair.


The Dallas’ Fed manufacturing index increased to -23.2 in June, beating expectations of -26.5. However, the latest reading still signalled worsening business conditions and sent the Nasdaq 100 index lower by more than 200 points on Monday.


Canada’s wholesale sales grew 3.5% in May, following a 1.4% decline in April, which lent support to the CAD/USD forex pair.


Brazil recorded a current account surplus of $0.65 billion in May, versus a year-ago gap of $4.63 billion, sending the BRL/USD pair slightly higher in forex trading this morning.

What else to watch today

Italy’s consumer confidence and manufacturing confidence index, France’s initial jobless claims and unemployed persons, Brazil’s consumer prices and Central Bank of Brazil’s Copom meeting minutes, Mexico’s balance of trade, Canada’s inflation rate, as well as US durable goods orders, Redbook index, S&P CoreLogic Case-Shiller 20-city home price index, FHFA house price index, new home sales, Richmond Fed manufacturing index, Richmond Fed services index, Dallas Fed services index, building permits and API crude oil stocks.


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