Carnival
Corporation & PLC (CUK, $49.73): “Smooth Sailing could be ahead for
Carnival Corp.”
By:
Matthew Ogren, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Carnival Corporation & PLC (NYSE:CUK) is a company that
provides its customers with many different cruise experiences across the
global. The firm operates in North America, Europe, Australia and Asia under a
variety of different brands. The company has been held in the International
Consumer Discretionary sector of the AIM International Equity Fund since being
pitched in early December of 2015.
• During Q3’16, Carnival
Corporation & plc opened up there newest training center located in the
Netherlands.
• More new ships to join
the fleet as the firm comes to an agreement for three more ships to be built by
Meyer Werft and Meyer Turku.
• Carnival Corporation
becomes the first firm within the industry to partner with INTERPOL; their
ships will bolster the best security screening of all cruise liners.
• The company has
announced a share repurchase program that will be in place until July 2017. The
program will aim to increase value for shareholders and it will include $434
million in repurchases.
Key
points: Carnival continues to grow its company and expand its
influence in a variety of different ways. Whether it be in employee training,
fleet size or ship safety, CUK is leading the way and setting the standard.
The Arison Maritime
Center was opened on July 14, 2016. The newest training center was named after
Micky Arison and Ted Arison. Ted was the founder of the firm. His son, Micky is
the current Chairman and is better known for his ownership of the Miami Heat, a
NBA franchise. The new facility is 110,000 square feet, doubling the size of
its predecessor. It is estimated that the new facility will allow the company
to train at least 6500 employees a year. These employees will be able to take
advantage of the most advance simulators and equipment available when it comes
to bridge and engine room training. By giving its employees the best available
training, Carnival is setting up both its people and its cruises for success.
During the quarter, CUK
also announced an agreement for three more ships to be made in the next five
years. All three will be 180,000 tons and will be powered by, the relatively
cleaning burning fuel, natural gas. These three will be added to two previously
announced ships, making a total of five new ships to be added by 2022. When
these new ships are introduced they will be added to the total of 101 ships the
company has across its ten brands.
On November 8th,
the company announced that they have entered into a partnership with INTERPOL.
After success from the four ship test group, Carnival’s entire fleet will now
be integrating INTERPOL’s I-Checkit system into its check-in progress. The
I-Checkit system will allow Carnival to screen travel documents against
INTERPOL’s Lost Travel Documents (SLTD) database. With this system in place,
Carnival will lead the industry in ship security, allowing all on board the
safest travels possible.
What
has the stock done lately?
Over the last two months
CUK has lingered in between the mid and the high forties. After sliding down to
$46 a share in mid-October, the price rebounded and is now at $49.73 as of
market close on Friday.
Past
Year Performance: CUK has decreased in value by a little
less than 5% since it was bought last December. The stock peaked very quickly
hitting its 52 week high of $57.52 in late December. Although, shortly after
the price crashed back down into the forties were it has remained for much of
the last 5 months. The company hopes that a combination of continued quality
performance and share buybacks will increase investor value and push prices up.
Source:
FactSet
My
Takeaway
There are
somethings to be excited about when it comes to Carnival. Despite the
underperformance of their stock price for much of the year, there is currently
good news pushing the company forward. The firm leads its industry and they
have focused on retaining that status. CUK has heavily invested in providing
top quality training for their staff. The company is also adding to its fleet
with multiple new ships being built in the coming years. But they haven’t forget
about their customers in doing so. The new partnership with INTERPOL will allow
all the company’s customers to feel safe while they vacation. Although the
stock price is currently far from its original target price of $61.13; the
company is moving in the right direction and the stock price is sure to
follow.
Source:
FactSet
