Investment Column: Carnival steers a course into choppier waters

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The Independent Online

Our view: Hold

Share price: 2,468p (+16p)

Shares in Carnival were pressured after the cruise ship operator issued its first-quarter figures on Tuesday. The news on trading was good but the stock lost ground as investors focused on uncertainty about fuel prices and the impact of growing unrest in the Middle East and North Africa.

The jitters were obvious even before the company issued the results and indeed even before it revised its full-year guidance earlier this month. After rising steadily from the end of November, Carnival's shares began relaxing at the beginning of the year. They partially rebounded at the end of January but then gave way again, and are now down sharply since the middle of Last month.

This might make some investors wonder whether it is time to wade in. The rising fuel costs and prevailing political unrest in Libya and elsewhere is worrying. But those willing to live to with the risk mightreason that the recent pullback in Carnival's share price offers an opportunity to buy in and capitalise on the company's longer-term prospects.

We, however, are feeling less bullish. We agree that its prospects appear sound but we would be very cautious about the short- and medium-term picture at Carnival. No one knows how the Libyan conflict will pan out or the consequences of the protests in the wider Arab world.

As Numis analysts highlighted the other day, the unrest has "resulted in some 280" itinerary changes. The situation may well deteriorate in the weeks ahead, in our view. At the same time, there are fuel prices pressures to consider. Together, these factors could conspire to push Carnival's shares even lower, hitting those who are buying in to the stock at current levels. On the other hand, for those who bought the stock before the recent price slide, it is probably better to keep holding on in anticipation of the recovery. Carnival should recover in due course – but we would not place any bets on when that might happen. Given this uncertainty, we would advice caution for now.


Our view: Hold

Share price: 71.25p (+2.25p)

Huntsworth is a global public relations business but a gentle sprinkling of PR fairy dust on its full-year results was not enough to keep the share price on firm footing last night.

The stock fell yesterday after the company, whose agencies include Citigate, Grayling, Red and Huntsworth Health, announced trading figures for the 12 months to the end of December which were lower than expected.

While the headline figure pointed to a healthy 11 per cent rise in revenues for Huntsworth, the fact is that there was a like-for-like decline of 0.7 per cent in constant currency terms, although it did swing from a pre-tax loss of just under £10m in 2009 to a profit of £21m last year.

On the upside, Huntsworth announced that British Airways had appointed its Grayling agency to handle publicity for the airline in 38 countries from the start of next month. It expects to sign a three-year contract in coming days.

Huntsworth was quick to highlight the fact that recent mandates had vindicated its reorganisation programme, as it would not have been considered for some of those contract wins a year ago. Huntsworth also revealed that it had bought out its American associate Atomic PR, which it expects to bring in "enhanced digital capabilities". The management team believes the growth will be weighted towards the second half of the year, but forecase that it would meet expectations.

In the City, analysts at Altium said that they would reduce their pre-tax profits forecast for Huntsworth by about 8 per cent, citing assumptions of lower revenues and margins. Although they added that, as a result, the stock would end up on multiples of less than eight times forward earnings, we think that concerns about top-line growth are liable to dampen the market's enthusiasm for the shares.