155 httpphxcorporate conclusion

This preview shows page 34 - 37 out of 45 pages.

155
Image of page 34
31 7.0 Conclusion Carnival is the largest cruise corporation in the world. It commands over 48% of the global cruise industry’s passengers and over 42% of its revenue. 156 Carnival operates 101 ships between the nine different cruise lines that it owns. The sinking of the Costa Concordia, one of Carnival’s cruise ships, in 2013 had various negative effects on the company. One major result of this incident was the decision by CEO and Chairman Mickey Arison to step down and appoint Arnold Donald as CEO. Carnival is beginning to shift its focus into the Chinese market. Carnival will profit from cheaper costs of building ships in China and from operating in an emerging market. Carnival’s main competitor, Norwegian, is growing through acquiring cruise lines and building more ships. Carnival charges higher prices than its competitors because they offer more onboard activities and they have market power. An analysis of Carnival’s cash flows shows that their operations bounced back in 2014 after a few down years. Their investing and financing activities suggest that Carnival is no longer growing through increasing and improving its ships. Meanwhile, Norwegian is also improving on the operating side and aggressively growing through additions to its ships. Carnival’s top line and bottom line numbers remain very stagnant while Norwegian’s revenue and earnings grow year after year. For any cruise corporation, property, plant, and equipment is the most necessary asset to the operations. As shown in the table in 6.1.3, Carnival’s PP&E remains nearly the same from 2011-­‐2014 while Norwegian’s PP&E nearly doubles through the four years. For these reasons, we believe that Carnival is not a good investment to make at this time. Carnival appears to be content with its large presence in the cruise industry and is not making enough investments to grow. On the other hand, Norwegian is entering a stage of growth and may begin to better compete with Carnival. In fact, Norwegian’s P/E ratio, 28.86, is higher than Carnival’s ratio, 27.61. This is another indication that investors have more confidence in Norwegian’s future than they do in Carnival’s future. 156
Image of page 35
32 8.0 Appendix 8.1 Carnival Corporation & PLC—Statement of Cash Flows Carnival Corporation & PLC Statement of Cash Flows (USD $), in Millions, Unless Otherwise Specified 12 Months Ended Nov. 30, 2014 Nov. 30, 2013 Nov. 30, 2012 Nov. 30, 2011 Nov. 30, 2010 OPERATING ACTIVITIES $ $ $ $ $ Net income 1,236 1,078 1,298 1,912 1,978 Adjustments to reconcile net income to net cash provided by operating activities Depreciation & amortization 1,635 1,588 1,527 1,522 1,416 Loss on ship sale & impairments, net 2 163 49 0 0 Goodwill, TM & other impairment 0 27 173 0 0 Share-­‐based compensation 52 42 39 46 43 (Losses) gains on fuel derivatives, net 271 (36) 7 (1) 0 Other, net 35 35 12 49 (15) Changes in operating assets & liabilities Receivables 75 (128) (15) (43) 106 Inventories 1 19 (16) (54) (12) Insurance recoverables, prepaid expenses & other 401 402 148 18 (14) Accounts payable 9 79 (24) 67 (36) Claims reserves & accrued other liab.
Image of page 36
Image of page 37

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture