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Carnival Gets Slammed on Wall Street

The deadly wreck of the Costa Concordia is exacting high costs


What a difference a disaster makes. The wreck of the Costa Concordia is exacting a severe price. First and most tragically important are the lives that have been lost. The count is up to 11 as of Tuesday morning, with many more still missing.

Now also at risk is the pristine shoreline along the Italian island of Giglio, as the stricken and gashed-open ship threatens to spill highly toxic fuel into water. The area is part of a national park and is home to many land and seagoing animals, some of which are already endangered. Carnival (NYSE:CCL), which is the parent of the Costa Concordia’s owner Costa Cruises, has hired a salvage firm to attempt to unload the fuel with the least amount of damage possible.

Third are the damages that Carnival — and its shareholders  — will absorb because of the wreck, which early indications say was the result of human, i.e. the captain’s, error.  Carnival says it has insurance to cover both the vessel and related liabilities, but the policies include deductibles of $40 million. That’s in addition to the lost income from an out-of-commission cruise ship, which Carnival estimates at $85 million to $95 million.

And that’s before any potential consumer backlash against the company can be calculated.

Little wonder that the stock tumbled on Tuesday some 14% below where it closed last week and is now around $29.50. Seeing danger elsewhere in the cruise industry as well, investors have likewise punished the shares of rival Royal Caribbean (NYSE:RCL), pushing them down by 4% in Tuesday trading.

Article printed from InvestorPlace Media,

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