Options Trade – Carnival Corporation (NYSE:CCL) Calls
Sunday, March 09, 2014

**OPTIONS TRADE: Buy the CCL Jul 2014 40.000 call (CCL140719C00040000) at or under $2.00, good for the day. Place a protective stop limit at $0.80 and a pre-determined sell at $4.00.

by Ian Harvey

March 09, 2014

Introduction

Cruise ship operator, Carnival Corporation (NYSE: CCL) will report its fiscal first quarter results before the market opens on March 13. Analysts expect the company to report a loss of $0.08 for the quarter. The stock has been up and down in 2014, losing 1.2% year to date.

Carnival was at the center of two high-profile disasters at sea which affected the entire cruise industry in recent years. The incidents forced cruise operators to offer deep discounts to attract tourists to their ships, weighing down the entire industry.

However, the worst seems to be behind Carnival, which posted stronger than expected earnings and revenues for its fourth quarter. Carnival has been heavily investing in maintenance and upgrades to its fleet of ships, as well as on marketing to help repair its brand name following the major disasters over the last two years. This will continue to weigh on earnings, but in the long run will be a positive for the company.

Company Details

Carnival Corporation is a cruise company. The Company operates in two segments: North America and Europe, Australia & Asia (EAA).

Its North America segment cruise brands include Carnival Cruise Lines, Holland America Line, Princess Cruises (Princess) and Seabourn.

Its EAA segment cruise brands include AIDA Cruises (AIDA), Costa Cruises (Costa), Cunard, Ibero Cruises (Ibero), P&O Cruises (Australia) and P&O Cruises (United Kingdom).

In addition to its cruise brands, it has a Cruise Support segment that includes its cruise port and related facilities located in Cozumel, Mexico; Grand Turk, Turks and Caicos Islands and Roatn, Honduras.

In addition to its cruise operations, it owns Holland America Princess Alaska Tours, a tour company in Alaska and the Canadian Yukon.

As of November 30, 2012, the tour company owned and operated, among other things, 12 hotels or lodges, over 300 motorcoaches and 20 domed rail cars.

Key Statistics for CCL

Current P/E Ratio (ttm) 26.0057
Estimated P/E(11/2014) 23.0859
Relative P/E vs. SPX 1.5018
Earnings Per Share (USD) (ttm) 1.5189
Est. EPS (USD) (11/2014) 1.7110
Est. PEG Ratio 1.4314
Market Cap (M USD) 30,751.16
Shares Outstanding (M) 592.24
30 Day Average Volume 3,651,944
Price/Book (mrq) 1.2482
Price/Sale (ttm) 1.9811
Dividend Indicated Gross Yield 2.53%
Cash Dividend (USD) 0.2500
Dividend Ex-Date 02/19/2014
5 Year Dividend Growth -3.58%
Next Earnings Announcement 03/14/2014

Technical Analysis

Carnival Corp. has a 1-year low of $31.44 and a 1-year high of $41.89. The stock has a 50-day moving average of $40.07 and a 200-day moving average of $36.93.

The company has a market cap of $29.892 billion and a P/E ratio of 28.53.

Earnings

Carnival Corp. last posted its quarterly earnings results on Thursday, December 19th. The company reported $0.04 earnings per share (EPS) for the quarter. The company had revenue of $3.66 billion for the quarter, compared to the consensus estimate of $3.58 billion.

During the same quarter in the previous year, the company posted $0.13 earnings per share. The company’s revenue for the quarter was up 2.2% on a year-over-year basis. On average, analysts predict that Carnival Corp. will post $1.72 earnings per share for the current fiscal year.

Analysts Opinions

Investment analysts at Stifel Nicolaus increased their target price on shares of Carnival Corp. from $43.00 to $48.00 in a note issued to investors on Thursday, 27th February, 2014.

Also, the company has been the subject of a number of research reports:-

• Analysts at Jefferies Group downgraded shares of Carnival Corp. from a “hold” rating to an “underperform” rating in a research note on Tuesday, February 11th. They now have a $33.00 price target on the stock, up previously from $31.00.

• Separately, analysts at HSBC upgraded shares of Carnival Corp. from a “neutral” rating to an “overweight” rating in a research note on Thursday, February 6th. They now have a $43.50 price target on the stock, up previously from $33.00.

• Finally, analysts at Numis Securities Ltd upgraded shares of Carnival Corp. from a “hold” rating to a “buy” rating in a research note on Tuesday, January 28th.

Four analysts have rated the stock with a sell rating, twelve have given a hold rating, nine have assigned a buy rating and one has issued a strong buy rating to the company. Carnival Corp. currently has an average rating of “Hold” and a consensus price target of $173.85.

Conclusion

Higher ticket prices and an increase in consumer spending helped the company post better than expected fourth quarter results, but the stock has been trading in a sideways pattern and it is possible that a breakout will come after the next earnings report.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE: Buy the CCL Jul 2014 40.000 call (CCL140719C00040000) at or under $2.00, good for the day. Place a protective stop limit at $0.80 and a pre-determined sell at $4.00.



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