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SunTrust Warns Of 'Broad Based Slowdown' In Cruise Pricing During September

NCLH, Carnival Corporation NYSE:CCL - SunTrust Warns Of 'Broad Based Slowdown' In Cruise Pricing During September

There is “little to like” in the data revealed by the latest cruise pricing survey, SunTrust Robinson Humphrey’s Patrick Scholes said in a report. He added that there seemed to have been a broad-based slowdown across all global regions.

Ad Pricing Down

Overall industry-wide advertised pricing for future sailings had declined 0.2 percent y/y in September, versus a 4.9 percent rise in August, a 7.9 percent increase in July and a 3.9 percent increase in June.

Carnival Corp CCL indicated a 1.1 percent increase in advertising pricing for all future sailings, down from the 6.4 percent growth previously noted.

“Looking under-the-hood, we see most brands down sequentially,” Scholes wrote.

Royal Caribbean Cruises Ltd RCL pricing dropped to a decline of 1.5 percent, from the previous 5.3 percent growth. Scholes noted, however, that the company had faced a tougher comp in September.

“While the company is modestly more financially levered than CCL, it has minimal near-term capital spending plans ($0.5B in 2017 vs. $2.4B in 2016.) and we see significant share repurchases as a real possibility in 2017,” the analyst mentioned.

Norwegian Cruise Line Holdings Ltd NCLH also saw pricing fall to a negative 1.5 percent, versus 1.3 percent previously. For Norwegian Cruise Line, pricing has decelerated every month since April.

“NCLH’s high-end Prestige brands were especially weak and it appears pricing for Regent Seven Seas took another leg-down, something we believe not contemplated in August earnings guidance,” Scholes stated, while adding that the company has sector-high leverage, which does not bode well if pricing continues to moderate.

Rating And PT Changes

Scholes maintained a Buy rating on Carnival, while reducing the price target from $57 to $54. The EPS estimates for 2017 has been reduced from $3.78 to $3.61, with the net yield estimate going from +2.7 percent to +1.7 percent.

The analyst maintained a Buy rating on Royal Caribbean Cruises, while reducing the price target from $97 to $92. The EPS estimates for 2016 and 2017 have been lowered from $6.06 to $6.00 and from $6.90 to $6.55, respectively.

Scholes downgraded the rating on Norwegian Cruise Line Holdings from Buy to Hold, while reducing the price target from $52 to $43. The EPS estimates for 2016 and 2017 have been reduced from $3.35 to $3.32 and from $3.97 to $3.64, respectively.

DateFirmActionFromTo
Oct 2016SunTrust Robinson HumphreyDowngradesBuyHold
Oct 2016WedbushDowngradesOutperformNeutral
Oct 2016UBSDowngradesBuyNeutral

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