Earnings look ahead: Carnival, Petrofac

Cruise line Carnival publishes full-year earnings, while Petrofac, the oil services firm, releases a third-quarter (Q3) statement.

Carnival Cruise Lines (full-year earnings 18 December)

Carnival is expected to report 10.6% growth in headline earnings per share, to 69.60 cents, while revenue is forecast to rise 4.5% to $4.45 billion. The average move on results day is 3.3%, while current options pricing suggests a move of 4.2%.

Recent increases in booking volumes have helped brighten the outlook for Carnival, but a tough first-half (H1) comparison means that the firm may struggle to convince investors that the outlook remains robust. However, the second half of the year will be easier, thanks to easier comparisons with storm-hit bookings. At 11.7 times forward earnings the shares are at their cheapest level since mid-2016, though the dividend yield is 3.6%, above the two-year average of 2.9%.

The shares have been in a descending channel since their peak in August 2017. While they rebounded from the October lows, the bounce petered out at £47, and a renewed push to the bottom end of the channel looks likely.

Petrofac (Q3 trading statement 18 December)

The ongoing Serious Fraud Office (SFO) investigation continues to cloud the outlook for Petrofac, but the firm continues to win new contracts, assuaging concerns about the potential impact of the investigation. However, the pipeline of bid opportunities remains strong, even if the recent rout in the oil price may crimp capital expenditure in the sector for the time being.

At 6.6 times forward earnings the shares remain cheap, but until the SFO investigation is ended the shares will likely remain under pressure and not receive a significant re-rating.

The share price has been in a falling wedge over the past month, but there is no sign of a break higher. Lower highs since the beginning of November mean that the price needs to close above £5.30p to break the bearish view.


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