Earnings Preview: Carnival Corp (CCL)

Carnival Corp (NYSE:CCL) -- which has been falling following last week's "Brexit" vote -- will report earnings tomorrow morning

Jun 27, 2016 at 11:07 AM
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While most sectors have been struggling as a result of Britain's decision to leave the European Union (EU), travel stocks have been especially hard hit. For example, cruise ship operator Carnival Corp (NYSE:CCL) is down 4.6% at $43.55, lingering near levels not seen since mid-February. What's more, Susquehanna trimmed its price target on CCL stock to $60 from $62 ahead of the company's earnings release tomorrow morning, saying Carnival may take a "conservative stance" on its earnings outlook in light of the "Brexit" vote. If CCL does struggle post-earnings, there's a chance for additional bearish notes to hurt the shares even more. 

Specifically, half of the analysts covering CCL stock give it a "strong buy" rating, while none deem it a "sell." Plus, the shares' boast a 12-month consensus price target of $60.06, which is a 37% premium to current levels -- not to mention territory the stock has never reached. As such, there's certainly the potential for downgrades or price-target cuts to hurt CCL in the near term. 

Switching gears, CCL's short-term options traders are more put-skewed than normal. This is illustrated by the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.04, which is higher than 78% of the past year's readings.

In the front-month series, peak put open interest of 5,719 contracts is found at the July 45 strike, where it appears as if a number of speculators have purchased new positions. In other words, they're bracing for an extended move south of $45 by the close on Friday, July 15 -- when the front-month series expires.

This seemingly bearish pre-earnings outlook from options traders comes despite the fact that CCL shares have averaged a 4.7% gain in the session after reporting over the past two quarters. Pre-earnings volatility expectations are picking up, too, with the options market pricing in a steep 9.2% post-earnings swing. Plus, the stock's Schaeffer's Volatility Index (SVI) of 42% falls in the 78th annual percentile, meaning premium on the equity's short-term options is more expensive than usual, historically speaking. 

Looking back, Carnival Corp (NYSE:CCL) hasn't exactly lit things up on the charts in the past year. In fact, the stock has dropped 11% in the past 12 months, not to mention a nearly 9% drop in June alone. Offering some glimmer of hope for CCL shareholders is the stock's 36-month -- or three-year -- moving average, which may contain the post-"Brexit" pullback. CCL hasn't closed below this level on a monthly basis since October 2013. 

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