Sunday, November 27, 2016

An AIM International holding: Carnival Corporation (CUK) by Matthew Ogren: “Cruising Ahead with Carnival”

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.

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