Carnival cruising into yield squall due to demand threats - Credit Suisse

Credit Suisse, which trimmed the target price for the shares to 5,300p from 5,910p as it knocked the stock off its previous 'outperform' rating, sees threats to demand in the 2018 financial year in each of the top three cruise markets.

In the Caribbean, which represents 39% of global passengers, Hurricane Irma has laid waste to potentially 24% of the region by passenger volume and could be facing a repeat of 2005 when earnings per share were downgraded 10%.

For the Mediterranean, representing 14% of passengers, the Swiss bank pointed to the recent terror attack in Barcelona, which is the number-one cruise port in a region where in the East there has been a 60% decline in volumes seen since 2011 due to issues in Athens and Turkey.

China, which represents 12% of passengers, the Korea travel ban is still in place and the industry is planning to trim capacity by 5% in 2018.

In the face of these potential issues, Carnival's 2017-2022 estimated capacity growth is 6.1%, the absolute level of capacity growth in 2018-2021 is double that of the past five years.

When coupled with increasing demand threats, analysts now assume more cautious 2018 yield growth.

Forecast yield, which measures the net revenue per available passenger cruise days, has been cutting to 1.5% from 3.0% and this, plus higher fuel prices, led to a 10% cut to forecast EPS.