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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  Carnival PLC    CCL   GB0031215220

CARNIVAL PLC

(CCL)
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Real-time Estimate Quote. Real-time Estimate CHI-X - 09/23 11:30:00 am
930.5 GBX   +2.82%
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More pain for Europe Inc as earnings drought seen spilling over into 2020

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10/04/2019 | 09:58am EDT
FILE PHOTO: A trader works as a screen shows market data behind him in London

LONDON (Reuters) - With markets taking fright again this week over trade tariffs and a faltering global economy, investors are braced for weak third quarter results in Europe and high expectations going forward could come crashing down to earth.

There have been a slew of profit warnings in recent weeks which have stirred worries that the earnings slowdown will spill over into next year as companies grapple with weaker economic growth stemming from trade spats and the uncertainty caused by the UK's delayed exit from the European Union.

Markets were rattled this week by U.S. manufacturing and services data that fell below expectations, a move by Washington to hit European products with tariffs and worries over Brexit.

It could be the worst week in a year for the pan European STOXX 600 <.STOXX> while the euro-zone benchmark <.STOXXE> is heading for its biggest weekly fall in two months.

After falling into a so-called corporate recession in the second quarter after two straight quarters of profit decline, European companies are expected to report in the coming weeks a 2.2% drop in profits in the third quarter, their worst quarter in three years, according to Refinitiv I/B/E/S.

While 4% earnings growth is seen as achievable for the United States in the fourth-quarter, interviews with investors, analysts and strategists and companies paint a different picture for Europe for the remaining months of 2019 and into next year.

For a graphic on U.S. versus Europe earnings growth:

https://fingfx.thomsonreuters.com/gfx/buzzifr/14/7815/7815/Pasted%20Image.jpg

Companies are taking measures such as cutting costs to shore up profits, but a harder-to-fix drop in demand for products is expected to be evident in company revenues for the July-September quarter, which are seen falling 0.3%, the first quarterly turnover drop since early 2018.

There is room for much disappointment given that consensus profit estimates for the fourth quarter and 2020 are still high at around 10% growth and analysts say expectations could be brought back down to reality over the coming months.

"The big hurdle for this year would be the fourth quarter, not the third quarter," said Fabio Di Giansante, head of large-cap European equities at Europe's top asset manager Amundi with 1.43 trillion euros ($1.6 trillion) in assets under management.

"I would expect more warnings after last week," Di Giansante said, following the earnings downgrades by Pearson, Imperial Brands, British Airways-owner IAG and Carnival Corp that knocked billions of pounds off their market value.

At best, Di Giansante expects profit growth to flatline in 2020 while UBS has pegged a 4% drop.

For a graphic on Earnings downgrades:

https://fingfx.thomsonreuters.com/gfx/buzzifr/14/7529/7529/Pasted%20Image.jpg

ROTATION INTO VALUE

A shift by investors into beaten-down stocks that look value for money in September has caught some investors off-guard, who were heavily invested in momentum stocks - rapidly expanding companies - but ahead of the results season value stocks are likely to be seen as a shelter, giving less of a shock if a company misses estimates.

MSCI global basket of value stocks rose 4%, while the momentum stocks slipped 1% last month. Before the rotation, momentum stocks had surged 20% as of August-end, while value stocks were up just 7%.

Di Giansante is among those that have sought safety in cheaper stocks.

"In a normal world, if you're cheap and you miss, in theory you should have more downside protection, but that hasn't been the case in the last year-and-a-half," he added.

For these stocks, "you need to see an inflection point around the corner, if you keep missing, it is postponed".

DEJA VU?

The final quarter of 2018 also started with major stock indexes close to current levels and earnings growth expectations for the year ahead around 10%.

For a graphic on 2020 earnings growth:

https://fingfx.thomsonreuters.com/gfx/buzzifr/14/7528/7528/Pasted%20Image.jpg

Analysts ended up slashing earnings growth estimates for 2019 to low single digits and the toxic mix of an uncertain macro environment and earnings downgrades led to one of the steepest sell offs in stock market history in late 2018.

But this time could be different, some market experts said, as central banks are more dovish now, providing monetary stimulus and interest rate cuts that have supported stock markets.

Equity strategists do not expect 2020 earnings to be as bad as 2019.

"You start with 10% ... the question is not where you start, but where you're going to end up," Edmund Shing, global head of equity derivates strategy at BNP Paribas said. He expects earnings to rise 6% next year.

Aside from the battering stocks received last week, the STOXX 600 index remains on track for its best annual performance in six years.

(Reporting by Thyagaraju Adinarayan and Joice Alves; editing by Josephine Mason and Elaine Hardcastle)

By Thyagaraju Adinarayan and Joice Alves

Stocks mentioned in the article
ChangeLast1st jan.
AT HOME GROUP INC. -5.87% 14.26 Delayed Quote.175.45%
BEST INC. -4.97% 3.06 Delayed Quote.-42.09%
CARNIVAL CORPORATION & PLC -1.94% 14.13 Delayed Quote.-71.65%
CARNIVAL PLC 2.87% 930 Delayed Quote.-75.16%
EURO / BRITISH POUND (EUR/GBP) 0.01% 0.91692 Delayed Quote.8.53%
EURO 50 SELECT 4.75% DECREMENT (SHLE, UHD) -0.01% 693.908254 Real-time Quote.-17.95%
EUROPE SELECT GREEN 50 5% DECREMENT (DIV, UHD) 0.06% 1531.687643 Real-time Quote.-7.48%
IMPERIAL BRANDS PLC 1.77% 1408.5 Delayed Quote.-25.95%
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A. -1.37% 100.6 Delayed Quote.-75.38%
JUST GROUP PLC 2.52% 44.78 Delayed Quote.-44.71%
LINE CORPORATION -0.19% 5360 End-of-day quote.0.19%
MICRON TECHNOLOGY, INC. 0.30% 49.85 Delayed Quote.-7.59%
NEXT PLC 2.00% 6110 Delayed Quote.-14.65%
PEARSON PLC 1.57% 505.2 Delayed Quote.-21.92%
RISE, INC. 0.00% 26 End-of-day quote.-13.33%
SHIFT, INC. 5.83% 15250 End-of-day quote.91.10%
STOXX EUROPE 600 0.55% 359.53 Delayed Quote.-14.02%
THE GLOBAL LTD. -1.03% 193 End-of-day quote.-59.02%
WILL GROUP, INC. -6.31% 876 End-of-day quote.-30.03%
WORLD CO., LTD. -2.41% 1418 End-of-day quote.-47.31%
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Financials (USD)
Sales 2020 6 355 M - -
Net income 2020 -8 502 M - -
Net Debt 2020 17 520 M - -
P/E ratio 2020 -1,23x
Yield 2020 3,49%
Capitalization 11 753 M 11 753 M -
EV / Sales 2020 4,61x
EV / Sales 2021 2,93x
Nbr of Employees 150 000
Free-Float 57,9%
Chart CARNIVAL PLC
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Technical analysis trends CARNIVAL PLC
Short TermMid-TermLong Term
TrendsBearishNeutralBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 18
Average target price 15,96 $
Last Close Price 14,13 $
Spread / Highest target 69,9%
Spread / Average Target 13,0%
Spread / Lowest Target -29,2%
EPS Revisions
Managers
NameTitle
Arnold W. Donald President, Chief Executive Officer & Director
Micky Meir Arison Chairman
Josh Weinstein Chief Operating Officer
David Bernstein Chief Financial & Accounting Officer
Gregory A. Sullivan Chief Information Officer
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