Travel Stocks Lower on Hurricane Irma

Cruise line operators slammed as Irma prepares to make landfall

Cruise Line Stocks tumble as Iram approaches Florida. See Stockwinners.com for details

Shares of cruise line operators are in focus amid concerns about the potential impact of Hurricane Irma on the cruise and travel industries, as well as the lingering effect of Hurricane Harvey.

HURRICANE IRMA

Hurricane Irma, which has intensified into a Category 5 storm, is forcing cruise operators to cancel or divert ships as it heads towards the Caribbean and the Florida coast.

The National Hurricane Center has said Irma is a “potentially catastrophic storm” with winds up to 185 miles an hour that will move toward the Virgin Islands and Puerto Rico later this week and then make its way toward Turks and Caicos, the Bahamas and Cuba before heading toward the Florida coast. Hurricane Harvey recently caused widespread damage when it hit the Houston area, with cruise operators rerouting some vessels and canceling other voyages to avoid the storm.

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IMPACT ON CRUISE OPERATORS

Cruise line operators are monitoring the storm, canceling voyages that haven’t left port and rerouting other ships to avoid stops at islands that may be affected.

According to reports, Norwegian Cruise Line (NCLH) will bring its two Miami-based ships back home ahead of schedule to avoid the storm. Both the 2,004-passenger Norwegian Sky and 4,248-passenger Norwegian Escape will return to Miami from Caribbean trips on Thursday instead of Friday and Saturday, respectively. The cruise operator also canceled sailings of the ships that were scheduled to begin on Friday and Saturday.

Yesterday, Royal Caribbean (RCL) canceled two sailings of Port Canaveral and Miami-based vessels to the Bahamas scheduled to begin on Friday and is rerouting one ship to the west and evaluating other sailings to the Caribbean, Cuba and Bermuda.

Carnival (CCL, CUK) has rerouted four vessels from an Eastern Caribbean to a Western Caribbean itinerary for the week, with a spokeswoman saying “We are watching Irma closely, but we are not canceling any sailings as of now.”

ANALYST COMMENTARY

Morgan Stanley analyst Jamie Rollo said on Tuesday that cruise demand is “solid,” but softened “a little” in August from July due to adverse weather, terror attacks and a U.S. travel warning for parts of Mexico. The analyst thinks Carnival, which reports earnings on September 26, will guide to slower yields in Q4. The firm remains “relatively cautious” on cruise stocks, but raised its price target on Carnival to $61 from $59.

OTHERS TO WATCH

Airline stocks, including American Airlines (AAL), United Continental (UAL), Southwest Airlines (LUV) and Delta Air Lines (DAL) are also on hurricane watch, and will likely be canceling flights in the affected areas.

This morning, United CFO Andrew Levy said Hurricane Harvey was the “largest operational impact we’ve had in the company’s history” and lowered its third quarter pre-tax margin and PRASM guidance. American Airlines President Robert Isom said the company is “keeping an eye” on Irma.

PRICE ACTION

In Wednesday’s trading, shares of Norwegian are down about 1%, Carnival shares trading in New York are down 0.5% and Royal Caribbean is down 1.2%.


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This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

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