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Investors punished shares of Carnival Corporation & plc (NYSE: CCL) (NYSE: CUK) on Wednesday after reports surfaced about foul conditions on board its stranded cruise ship, the Triumph. A fire broke out in the Triumph’s engine room on Sunday, leaving the ship floating helplessly off the coast of Mexico for days. Far from being an extended vacation, passengers complained about terrible food, sweltering temperatures, and generally miserable conditions.
News of the Triumph’s problems has been out for days, but investors for the most part gave Carnival a free pass. That pass has now expired.
Carnival today said it expects the impact from voyage disruptions and related repair costs will result in an $0.08 to $0.10 earnings per share reduction in the company’s 2013 first half. However, this estimate does not appear to factor in the effects of negative publicity. Just over a year ago, a cruise ship sank in a deadly disaster off the coast of Italy. While the event is unrelated, reports of poor conditions aboard the Triumph might remind investors of the tragedy and spark concerns about a change in spending habits. Evidence of this is obviously speculative at present, but many investors aren’t taking chances.
The Triumph is being towed to Alabama and should arrive Thursday afternoon, not soon enough for many stricken passengers… or investors, for that matter.
Carnivals stock is lower by 3.25 percent mid-day on Wednesday. Royal Caribbean Cruises Ltd. (NYSE: RCL) is lower by 2.3 percent.
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