Nomura Revises Earnings Estimates for Carnival

Nomura Equity Research has revised its 2012/2013 EPS expectations to reflect lower yields in Europe and higher SG&A costs, which are likely to result from the Concordia incident, according to Analyst Harry C. Curtis . Nomura’s 2012 EPS estimate declines to $2.36 from $2.59 due to lower capacity (-$0.07), yields (-$0.16), and higher SG&A (-$0.01) and a small benefit from an increased share repo (+$0.01). The 2013 estimate falls to $3.06 from $3.17 which now assumes that Carnival Corporation spends ~$300m of the insurance proceeds to repurchase stock. While Nomura does not expect a long-term impact, the price target declines to $36 from $39 due to lower near-term EPS power.

The Concordia cost 450mn euro in 2006 and has passenger capacity of 2,978, or roughly 2% of Carnival’s fleet. Removing its capacity from the model costs the company $0.07 per annum going forward. The extent of the damage has yet to be fully determined, but the ship could be beyond repair. The vessel is insured and Nomura expects the residual valued to be ~ $320m.

Yields for the remaining Costa brand, which is 14% of Carnival’s global capacity, could be down ~10% this year given the timing of the tragedy. January is a crucial time for European bookings because it is the onset of Wave Season (three months when +50% of bookings are made), according to Nomura's report.



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