Cruise Industry Hits a Patch of Rough Water

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The waters are getting choppy for the cruising giants as 2012 comes to a close.

Market leader Carnival (CCL) issued disappointing guidance during last week's quarterly report. Rival Royal Caribbean (RCL) is running into obstacles in financing its next mega-ship. Norwegian Cruise Line wasn't in the news, but NCL hasn't been able to complete its IPO since calling it off last year.

The year that began problematically enough with the tragic grounding of Costa Concordia off the Tuscan coast of Italy doesn't appear to be getting a whole lot better.

The Cure for Seasickness

That's not to say investors are complaining. Shares of Carnival and Royal Caribbean are each trading near fresh highs and handily beating the market. But last week's stumbles show that the industry still has a ways to go in wooing back passengers.

Even after Carnival's quarterly report served up better than expected results, the stock still closed 5 percent lower after the world's largest cruise ship operator warned that it will fall short on the bottom line for its new fiscal year. Carnival is targeting no more than $2.40 a share in earnings on 5 percent to 6 percent in revenue growth. Wall Street was forecasting a profit of $2.49 a share on a 7 percent uptick in revenue.

Royal Caribbean's setback has little to do with the cruise line itself. It's the company's South Korean shipbuilder that ran into a roadblock in financing its third Oasis-style megaship for the cruise line. Finland's support for financing the deal fell short last week.

The shipyard has other financing options, and Royal Caribbean is still likely to get the vessel on time for its slated 2016 debut. However, it's another black eye for an industry that hasn't been as festive as its midnight buffets on the pool deck.

Memories of Costa Concordia still sting

We're closing in on the painful one-year anniversary of the Costa Concordia accident that left 32 passengers and crew members dead.

The catastrophic grounding of the ship -- part of Carnival's massive worldwide fleet -- rightfully scared off potential cruise passengers, who rarely questioned their safety before January's accident.

However, now that Carnival is pointing to slower growth in the coming year, don't be surprised if big deals are back again. Shareholders may think that the companies are doing just fine, but the uninspiring guidance tells a rockier tale.

Motley Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above.


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