| From: Jon Koplik | 10/24/2022 1:01:16 PM | | | | | | WSJ / travel / comment from United Airlines CEO ...........................................................
From :
WSJ
Oct. 22, 2022
What CEOs Are Saying: The Fed ‘Should Look Out the Front Windshield’
Leaders from Tesla, IBM, Goldman Sachs and others discuss the economic outlook, Fed policy and business trends
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United Airlines Holdings Inc. Chief Executive Scott Kirby:
“There has been a permanent structural change in leisure demand because of the flexibility that hybrid work allows. With hybrid work, every weekend could be a holiday weekend. That’s why September, a normally off-peak month was the third strongest month in our history. People want to travel and have experiences.” (Oct. 18)
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One would think that this is also good for the cruise industry (?)
Jon.
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| From: Harshu Vyas | 2/6/2024 1:02:12 PM | | | | | | | Seems to me some (really) short-term puts on CCL wouldn't be a terrible idea. The Houthi situation doesn't help CCL at all! And the technicals have looked terrible since the stock "double-topped." Is it really as simple as it looks? In the long-term, I love CCL but I can't buy on no support! |
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| From: Jon Koplik | 3/20/2024 12:01:28 PM | | | | | | 3/8/24 WSJ piece : cruise industry stocks, debts taken on during pandemic .........................
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to see a few charts / photos / etc. that do not copy here, go to :
wsj.com
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archive.is
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Jon.
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WSJ
HEARD ON THE STREET
March 8, 2024
Cruises Are More Popular Than Ever -- and Investors Are Late to the Party
This year’s ‘wave season’ will break revenue records for cruise lines, but investors are wary of massive debts the industry took on during the pandemic
By Spencer Jakab
Still looking for an amazing deal on a cruise?
Four years after Covid-19 shut the industry down, a brief golden age of uncrowded decks and deep discounts has come to an end. With ships sailing at capacity and prime cabins selling out quickly, grabbing an offer as the industry’s traditional “wave season” winds down this month might be wise.
Investors are in more luck than travelers: Even though the lowest prices are off the table, bargains remain available in the shares of cruise lines -- especially for those not put off by a bit of choppiness.
“Wave season” is the term for the window of time at the beginning of the year when the cruise industry offers its best rates. During 2023’s season, executives were all but shouting to Wall Street that they were seeing monster demand. Analysts were slow to take the hint: More than two-thirds of those covering industry giant Carnival, for example, rated its stock a “sell” or “hold” early last year. Its shares, along with Royal Caribbean and Norwegian Cruise Line Holdings, were the top three performers in the S&P 500 during the second quarter of 2023.
Since then, though, only Royal Caribbean has been able to keep rallying, coming close to erasing its pandemic losses. The other two are still down by more than half. Further gains look likely for all three as anecdotes trickle in about what is shaping up to be the industry’s best wave season ever.
“The wind is behind their sails -- pun intended,” says Michael Erstad, a senior analyst covering the consumer sector at research firm M Science.
Cruises have long been affordable compared with land-based alternatives. That is especially true during bad economic times due to the unique economics of cruise ships -- last minute deals abound because it makes no sense to leave cabins empty. Even today, though, cruises offer a lot of bang for the buck. The all-in cost of shore-based hotels, flights, restaurant meals and vacation rentals have all risen more.
“We are nowhere near our ceiling when it comes to the price environment” says Carnival Chief Executive Josh Weinstein.
And more of cruisers’ dollars are hitting the bottom line as operators have become leaner and smarter. For example, they have gotten better at selling onboard, high-margin goodies such as drinks packages and shore excursions typically responsible for more than a third of revenue -- often before the ship even leaves port. Royal Caribbean’s CEO, Jason Liberty, gushed to investors last month that his company had 40% more pre-cruise revenue booked in 2024 than in the same period of 2023.
Another way cruise lines boost sales while also cutting costs is directing ships to their own private ports or islands. Often located a short sail from Florida, ships burn less fuel and nearly every dollar spent on drinks or souvenirs is captured by the cruise line. With many older ships retired during the pandemic, their fleets are also more fuel-efficient.
The best way to compare today’s profitability with the carefree days before the pandemic is net yield -- money left over per available passenger cruise day after paying travel agents and other operating expenses. Royal Caribbean, which recently launched the world’s largest cruise ship, Icon of the Seas, says its net yield rose by nearly 18% in constant currency terms compared with 2019 during the fourth quarter.
Things should be even better this year as passengers cruise in record numbers. One sign of a tighter market is how early they are making reservations. For example, Royal Caribbean’s cruises were being booked 202 days in advance on a rolling 12 month basis in December, according to Erstad. That was 11% longer than in the same month before the pandemic. He says that, partly as a result, pricing began a sharp improvement during 2023’s wave season that has continued.
So what’s the catch? A big one: Cruise lines had to borrow heavily to stay afloat financially when their ships were idle or half-empty. Between 2019 and the end of fiscal year 2022, net debt on the three largest cruise lines’ balance sheets more than doubled to $63 billion. All carry junk credit ratings.
But as any sailor knows, exciting things happen when you release ballast. Carnival has a set of Wall Street-friendly financial targets dubbed SEA Change. The most interesting one, “E,” stands for a 50% bump in a company-specific measure of earnings before interest, tax, depreciation and amortization by 2026 compared with what the company had been expecting last June for all of 2023. Much of that would be available to pay debt because Weinstein says the company is only taking delivery of three new ships between now and 2027.
“That is a remarkably small order book for this corporation, and that’s a good thing.”
Carnival’s free cash flow was more than $2 billion last year. Analysts polled by FactSet see it more than doubling by 2027. If Carnival meets its goals and reaches investment grade in a few years then it can also refinance expensive loans more cheaply, though much depends on how quickly the Federal Reserve cuts interest rates.
The cruise line that has made the most progress on its balance sheet and that analysts single out for navigating the pandemic best is Royal Caribbean. Its debt has been upgraded twice by Moody’s in just the past year. Though it has fewer ships and less revenue, it has gone from a market value half as high as Carnival’s in 2018 to one-and-a-half times as high today.
Royal Caribbean has momentum and is the safe choice. Investors with strong sea legs should consider Carnival, the cheapest of the bunch on a debt-adjusted basis. All three large cruise lines still trade below their 10 year average prior to the pandemic as a multiple of forward Ebitda.
Write to Spencer Jakab at Spencer.Jakab@wsj.com
Copyright © 2024 Dow Jones & Company, Inc.
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| From: Jon Koplik | 4/11/2024 12:36:55 AM | | | | | | Bloomberg -- Carnival puts Miami headquarters up for sale as FL real estate soars ..................
Bloomberg
April 9, 2024
Carnival Puts Miami Headquarters Up for Sale as Florida Real Estate Soars
By Natalie Wong and Anna J Kaiser
Carnival Corp. has listed for sale its sprawling headquarters on the outskirts of Miami, seeking to cash in on real estate the cruise giant has owned for roughly three decades.
The company is now looking to downsize to about 300,000 square feet (27,871 square meters) of new office space in the Miami area, according to a person familiar with the matter, who asked not to be named citing private discussions.
Carnival expects to remain at its current headquarters in the city of Doral for the next two years. The building dates back to the 1980s and encompasses 470,000 square feet. A spokesperson confirmed that the firm is “exploring options for new office facilities.”
Carnival hired brokerage Cushman & Wakefield Plc to handle the sale, a spokesperson for the brokerage confirmed, declining to add further details. The last recorded sale of the property dates back to 1983, when it was acquired for $16.6 million.
The decision to sell reflects a broader trend of companies reevaluating their office space needs in the post-pandemic era. While some tenants are looking to upgrade their facilities to entice employees back to the office, others are downsizing to reduce costs.
For Carnival, the sale is a chance to unlock a potential windfall from decades of real estate growth in Doral, where property values have soared alongside the area’s condo boom and the popularity of Donald Trump’s Blue Monster golf course. But it will also mean the company will be navigating a red-hot market to find new office space in the Miami region.
Currently, Carnival’s Doral headquarters is about 15 miles away on gridlocked highways from the port of Miami, where Carnival ships dock.
Royal Caribbean Cruises Ltd., which unlike Carnival is based inside the port, has recently broke ground on a new 10-story headquarters building in the vicinity. MSC Cruises SA, which is building a new cruise terminal at the port, said it will move its US headquarters to a downtown Miami office building near the port as well.
Carnival’s move to upgrade its headquarters underscores how well the cruise industry has done in recent years. Carnival, one of the largest cruise companies in the world, has seen bookings bounce back to a record since the pandemic. The company has 120,000 employees globally and serves about 13 million cruise vacationers per year.
© 2024 Bloomberg L.P.
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| From: Jon Koplik | 6/26/2024 1:19:59 PM | | | | | | WSJ : Carnival / booking further in advance and paying more ................................
WSJ
June 26, 2024
HEARD ON THE STREET
Carnival’s Ship Is Coming In
Cruisers are booking further in advance and paying more as berths fill up
By Spencer Jakab
Still coming off a near-death experience as a result of the pandemic, it doesn’t take much to send cruise-line investors rushing for the lifeboats.
When a Bank of America analyst warned of “modestly softer pricing” for oceangoing companies on June 14, it knocked industry-leader Carnival’s shares by 7%. But on Tuesday the company’s fiscal second-quarter results assuaged those fears and then some. Carnival beat earnings and revenue expectations handily, raised full-year financial guidance and, perhaps most important, signaled that 2025, with modest growth in industry capacity, could look even better.
Carnival’s stock was the top performer in the S&P 500 on Tuesday. William Blair analyst Sharon Zackfia was among those raising forecasts. She noted that “demand trends bode well for considerable pricing power in 2025.”
“We are hitting records on top of previous records” a positively gleeful Carnival chief Josh Weinstein said on an investor call, noting for example that adjusted earnings before interest, tax, depreciation and amortization was the company’s highest in 15 years.
Look below the waterline, though, and Carnival is a different company than it was before the day that “Covid-19” entered our vocabulary. That is why its shares remain more than 60% below their January 2020 level. Long-term debt is almost triple, and shares outstanding nearly double their levels in those happier times. The important thing now is how quickly Carnival rights its balance sheet. While its debt is still in junk territory, it was upgraded Tuesday by Standard & Poor’s to BB, two levels below investment grade.
“There will be a transfer of the enterprise value from the debt holder to the shareholder,” David Bernstein, Carnival’s chief financial officer, said in an interview.
In other words, as the company’s free cash flow is directed solely at paying down borrowings or building up cash, the share price should benefit proportionately. Maybe even disproportionately: The impact might be better than cash going to stock buybacks or dividends since it will remove a discount that still weighs on Carnival’s valuation. Many institutional investors eschew companies that recently flirted with bankruptcy.
“There are a lot of portfolios that are hesitant to book companies that are incredibly leveraged,” admitted Bernstein.
Carnival and its competitors also took on a lot of expensive debt to stay afloat during the pandemic. Simply being able to refinance some of it more cheaply will benefit their bottom lines.
Getting a better return on their huge fixed assets will speed up that process. Carnival’s net yield, an industry measure of revenue less commissions and other costs per available cruise day, increased more than expected during the second quarter and the company raised its forecast for the back half of the year.
To get a sense of how important it is, Carnival estimates in a sensitivity analysis that a 1% increase in net yield would boost its net income by $97 million in the second half of fiscal 2024. And occupancy hit 104% during the second quarter compared with 98% a year ago (some cabins hold an extra passenger).
Especially encouraging is what Carnival and its competitors can’t do now that fares and occupancy are so high: order new ships. Many less-efficient vessels were scrapped, and there will be slow growth in 2026 and 2027 as the absence of industry orders during the height of the pandemic works its way through specialized shipyards. That will lead to record free cash flow for Carnival in coming years despite projects such as outfitting a Bahamian private beach, Celebration Key, as a cruise destination -- a cost-saving and revenue-raising measure.
Even after Tuesday’s 8.7% rally, Carnival’s shares only trade at around 8.4 times enterprise value to forward Ebitda. That compares with an average of about 9.6 times in the 10 years before the pandemic. The best time to buy Carnival’s shares was when their price reflected a real threat of bankruptcy. The second best time might be now.
Write to Spencer Jakab at Spencer.Jakab@wsj.com
Copyright © 2024 Dow Jones & Company, Inc.
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| From: Jon Koplik | 8/12/2024 9:53:50 AM | | | | | | Barrons -- Cruises Are Beating Theme Parks. It’s All About Prices ..................................
Barrons
Aug 08, 2024
Cruises Are Beating Theme Parks. It’s All About Prices.
By Jack Hough
Royal Caribbean's Utopia of the Seas dwarfs the older cruise ship Vision of the Seas, seen docked at Perfect Day at CocoCay, the cruise line's resort in the Bahama.
Put off by high theme park prices? Try a floating one. J.P. Morgan reckons that cruises are 20% cheaper now than land-based alternatives, versus 10% to 15% cheaper in 2019. It predicts a market share shift in favor of cruising, which is part of why it just launched coverage of Six Flags Entertainment at Underweight, while adding Overweight-rated Royal Caribbean Group to its Analyst Focus List.
Your reporter noticed sharply higher prices for admission, hotels, and restaurants at Walt Disney World in Florida as the pandemic eased. Discounts grew skimpy. Perks that were previously free -- airport bus service, parking for hotel guests, a handful of daily chances to shorten ride waits -- took on big surcharges. Walt Disney was taking advantage of ravenous demand for so-called revenge travel, while covering for steep losses from its streaming services.
Disney World prices remain high, but more recently, discounts have grown larger, and there has been some surcharge backtracking -- parking is once again free for hotel guests, for example. It’s now clear why. This past week, Disney’s results for its fiscal third quarter showed meager growth in its Experiences division, which includes parks. Management foresees flat revenue and a small decline in operating profit there during the fourth quarter. Comcast reported weak results for its theme parks, too.
With theme park prices broadly up 37% since 2019, according to J.P. Morgan, there will be limited opportunity for companies to juice results by charging more. The silver lining for Disney in particular is that its streaming operations have now reached modest profitability, and its studios are riding a record-setting summer box-office haul from Inside Out 2, an animated film featuring personified emotions. Also, its Experiences division includes its small but fast-growing cruise operations.
The outlook for cruising is brighter than that for theme parks. There are new ships, but not too many; capacity will increase 5.6% this year but only 2.3% next year. Demand is strong, with passengers booking trips further out and paying up for them. Royal Caribbean in particular looks likely to beat Wall Street growth forecasts, says JPM. Its price target is $210 a share; the stock recently went for around $154, or 13.4 times this year’s earnings consensus.
The problem for Six Flags is that its own experiment with sharply higher prices produced a disastrous drop in attendance. Market share will now be difficult to win back without aggressive discounting. A recent merger with rival Cedar Fair could yield cost cuts. But Six Flags is also years behind on capital spending on its rides. Catching up there amid minimal ticket price growth won’t be fun, or flattering for free cash flow.
Write to Jack Hough at jack.hough@barrons.com.
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| From: Jon Koplik | 2/24/2025 1:21:46 AM | | | | | | Bloomberg -- Lutnick’s Tax Comments Give Cruise Operators Case of Deja Vu ....................
Bloomberg
February 21, 2025
Lutnick’s Tax Comments Give Cruise Operators Case of Deja Vu
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Commerce Secretary warned cruise companies may face taxation
Analysts question feasibility of new taxes even as shares fell
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By Redd Brown
Cruise operators may yet avoid paying more US corporate taxes despite threats from US Commerce Secretary Howard Lutnick to close favorable loopholes.
Lutnick’s comments on Fox News Wednesday that that US-based cruise companies should be paying taxes even on ships registered abroad sent shares lower, though analysts indicated the worry may be overblown.
“We would note this is probably the 10th time in the last 15 years we have seen a politician (or other DC bureaucrat) talk about changing the tax structure of the cruise industry,” Stifel Managing Director Steven Wieczynski wrote in a note to clients. “Each time it was presented, it didn’t get very far.”
Industry shares fell sharply Thursday. Royal Caribbean Cruises Ltd. closed 7.6% lower, the largest drop since September 2022. Peers Carnival Corp. and Norwegian Cruise Line Holdings dropped by at least 4.9%.
All three continued slumping Friday, trading lower by around 1% each.
Cruise companies often operate their ships in international waters and can register those vessels in tax haven countries to avoid some US corporate levies. It’s exactly those sorts of practices with which Lutnick has taken issue.
“You ever see a cruise ship with an American flag on the back?,” Lutnick said during the interview
which aired Wednesday evening. “They have flags like Liberia or Panama. None of them pay taxes.”
“This is going to end under Donald Trump and those taxes are going to be paid.” He also called out foreign alcohol producers and the wider cargo shipping industry.
The vessels are embedded in international laws and treaties governing the wider maritime trades, including cargo shipping. Targeting cruise ships would require significant changes to those rule books to collect dues from the pleasure crafts, analysts noted. The cruise industry represents less than 1% of the global commercial fleet, according to Cruise Lines International Association, an industry trade group.
They also pay significant port fees and could relocate abroad to avoid new additional taxes, according to Wieczynski, who sees the selloff as a buying opportunity.
“Cruise lines pay substantial taxes and fees in the US to the tune of nearly $2.5 billion, which represents 65% of the total taxes cruise lines pay worldwide, even though only a very small percentage of operations occur in U.S. waters,” CLIA said in an emailed statement.
Should increased taxes come to pass, the maximum impact to profits would be 21% on US earnings, Bernstein senior analyst Richard Clarke wrote in a note. That hit wouldn’t be enough to change their product offerings, though it may discourage future investment. Recently, US cruise companies have spent billions beefing up their operations in the US and Caribbean.
Cruise lines already employ tax mitigation teams that would work to counteract attempts by the US to collect taxes on revenue generated in international waters, wrote Sharon Zackfia, a partner with William Blair.
Royal Caribbean did not respond to requests to comment. Carnival and Norwegian directed Bloomberg News to CLIA’s statement.
© 2025 Bloomberg L.P.
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| To: Jon Koplik who wrote (176) | 2/24/2025 1:29:02 AM | | From: Jon Koplik | | | | CNBC -- Cruise stocks tumble after Commerce Secretary Lutnick signals tax crackdown ..................
CNBC
Feb. 20, 2025
Cruise stocks tumble after Commerce Secretary Lutnick signals tax crackdown
By John Melloy and Scott Schnipper
Shares of cruise lines tumbled Thursday after Commerce Secretary Howard Lutnick suggested the Trump administration would crack down on taxes paid by the companies.
“You ever see a cruise ship with an American flag on the back?” Lutnick said in an appearance late Wednesday on Fox News.
“None of them pay taxes ... every supertanker. None pay taxes ... all foreign alcohol. No taxes. This is going to end under Donald Trump,” said Lutnick.
Shares of Carnival dropped 5.9%, Royal Caribbean lost 7.6%, Norwegian Cruise Line fell 4.9% and Viking Holdings weakened by 3%.
Analysts at Stifel Financial called the selling in cruise stocks a “massive overreaction,” and recommended investors use the slump to buy the names “on weakness.”
[T]his is probably the tenth time in the last 15 years we have seen a politician (or other D.C. bureaucrat) talk about changing the tax structure of the cruise industry,” wrote analysts led by Steven Wieczynski. “Each time it was presented, it didn’t get very far.”
[F]om a tax standpoint the cruise industry is embedded under the cargo industry in the eyes of the Internal Revenue Service,” Stifel wrote. “That would mean the entire cargo industry would have to be turned upside down even before they got to the cruise industry, which is a sliver of the size of the cargo industry.”
The cruise industry might respond by moving their corporate headquarters outside the U.S., reducing the number of jobs kept in the U.S., the report said. “With 90%+ of their business being conducted in international waters, it would then be impossible for the U.S. (or any other entity) to target the cruise operators.”
Stifel has buy recommendations on six cruise industry stocks: Carnival, Royal Caribbean, Norwegian, Viking as well as Lindblad Expeditions Holdings and OneSpaWorld Holdings
“Cruise lines pay substantial taxes and fees in the U.S. -- to the tune of nearly $2.5 billion, which represents 65% of the total taxes cruise lines pay worldwide, even though only a very small percentage of operations occur in U.S. waters,” said the Cruise Lines International Association, in a statement. “Foreign flagged ships that visit the U.S. are treated the same for taxation purposes as U.S. flagged ships visiting foreign ports, which provides consistent reciprocal treatment across international shipping.”
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