Wells Fargo Securities Estimates Impact Of Title III Lawsuits On U.S. Cruise Lines

Seatrade Cruise News

Colchester, Essex, United Kingdom

7 May 2019 

Wells Fargo Securities estimated potential impacts of the Trump administration's new Cuba policies in a note to investors that considered if travel restrictions were implemented and how lawsuits could go.  So far, the US has not clarified additional travel restrictions announced in April. 

EPS impact to Carnival, Norwegian, Royal 

However, if Cuba cruises were to end, the brokerage estimated the annualized earnings per share impact on Carnival Corp. as 5 cents, Norwegian Cruise Line Holdings as 42 cents and Royal Caribbean Cruises Ltd. as 20 cents. 

Cuba accounts for 1%, 4% and approximately 2.5% of CCL, NCLH and RCL’s respective global capacity allocation, according to the brokerage. its analysis on based on Cuba generating a 30% to 100% premium on typical Caribbean itineraries, based on five-day sailings in November and December 2019, excluding holiday departures.  If Cuba stops are prohibited, these itineraries would garner more typical Caribbean rates. 

Helms-Burton Title III lawsuits 

Part of the Trump administration’s policy changes ended the Title III waiver of the Helms-Burton Act, enabling US citizens to sue individuals/companies (including foreign) in the US courts for commercial use of their properties nationalized by the Cuban government after the 1959 revolution.   

Carnival Corp. became the first company sued on the day Title III became operative.  'We believe other cruise companies could also be sued, but that the cases will likely be tied up in the federal court system for some time and subject to future changes in executive branch foreign policy,' analyst Tim Conder said in the Wells Fargo note. 'Therefore, we see no near/intermediate material impact to the financial results of cruise industry companies.' 

Wells Fargo rates CCL, NCLH and RCL 'outperform' (buy).

Posted 07 May 2019 

NOTE: The Ministry of Tourism of the Republic of Cuba reported that approximately 800,000 visitors arrived by cruise ship to the Republic of Cuba in 2018 of 4.78 million visitors.