Key points:
- Carnival Corp recorded an EPS of -$1.66 and revenue of $1.62B, falling short of expectations
- Just as post-covid travel optimism gained traction, the Ukraine conflict casts another shadow
- With surging fuel prices, Carnival expects a loss for FY22
Up until recently, the travel sector was infused with post-Covid optimism. As variants grew weaker, restrictions eased and cultural fear started to subside; investors started to look back to travel stocks for the perfect ‘bounce’. However, it appears the respite might not last long for some travel companies, particularly those who rely on heavy amounts of fuel usage.
Just as Covid appeared to be slipping away, the conflict in Ukraine welcomed another bout of panic selling and pricing hikes; especially fuel, bearing in mind sanctions could throw oil and fuel prices up towards record highs.Â
This was the message from Carnival Corp (NYSE: CCL) today, after announcing disappointing Q1 earnings that missed on both EPS and revenue. The cruise operator posted a loss of $1.89B, or $1.66 on a per-share basis, compared to expectations of $1.23 per share. Similarly, revenue came in at $1.62B, falling seriously short of the $2.33B expected by Wall Street.
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If investors looked out for an update from Jefferies previous to the release, then they might have been aware that rising fuel costs will be a serious weight on the company’s normal processes; issued in a cautious warning previous to the earnings update. Now, Carnival is expecting to post a loss for FY22, citing the surging fuel prices as the sole catalyst.Â
It's an unprecedented time for travel companies. Just as the light was beginning to re-emerge, surging fuel prices once again throw companies into grievous uncertainty. CCL is down 31% year on year, and with today’s news, the short-term future for Carnival is far from rosy.Â