Carnival Stock Falls 18% In Wake Of Cruise Ship Disaster

Carnival Corp.’s shares slid by around a fifth on Monday as the owner of the ship that ran aground off Italy’s west coast over the weekend estimated the initial financial impact of the marine disaster to be up to $95-million (U.S.).

The company, which owns the Costa Concordia through an Italian subsidiary, Costa Crociere, said the ship was expected to be out of service for the remainder of the year.

Investors reacted with alarm as they began to assess the implications behind the shipwreck on the company’s future earnings. Analysts warned of the potential impact on already subdued reservations during the busiest part of the bookings season. Jamie Rollo of Morgan Stanley cut the company’s estimated earnings per share by 30 per cent.

“Cruising is a safer way to travel than air but the investigation may take time, the story is getting global publicity and people are unlikely to book until confidence returns,” he said. “An apparently disorganized evacuation may lead to tighter regulation.”

Wyn Ellis of Numis said the negative implications for the company would prove short-term. “There will, justifiably, be questions about the adequacy of management and emergency operational procedures on board which may have longer-term cost implications,” he said. “However, we expect that in due course trading will return to normal and, in our view, longer-term valuation fundamentals will not be materially impacted.”

The shares, which had fallen by almost a third in the last year, fell more than 18 per cent on Monday to £18.31 ($28.60 Canadian), wiping more than £3-billion off the value of the company since Friday.