December 20, 2013 5:04 pm

Carnival cruises to three-month high after upgrades

Cruise operator Carnival rose up the FTSE 100 for a second day after receiving a number of upgrades in response to its recent trading update.

Carnival, which like most leisure stocks has had a stuttering recovery since the financial crisis, rose to a three-month high after issuing its outlook for 2014, which beat expectations and drew many favourable comments.

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The company’s shares had sunk in September after it reported a 30 per cent fall in profits following a number of blunders, including a Caribbean cruise that was cut short after engine problems, and an engine fire that cast adrift its Carnival Triumph ship without power in the Mexican Gulf for four days.

But the company’s Costa cruise brand, whose Concordia sank off the coast of Italy nearly two years ago, made a strong recovery in the fourth quarter, and boosted hopes for growth across the company in the coming quarters, analysts said.

“If Costa can recover to that degree, then Carnival should also be able to recover from its brand’s image issues from a far less serious issue,” said Robin Farley at UBS, which upgraded the stock to buy from neutral and its price target to £25 from £21.

S&P Capital IQ raised its target price to £28 from £27, while Credit Suisse upgraded to outperform from neutral and lifted its target price to £26.42 from £18.43.

“Following better than expected fourth quarter and 2014 guidance, now is the right time to get on board,” said CS analyst Joel Simkins. “We had been hoping that new CEO Arnold Donald could be a change agent and it appears that Carnival is making some positive steps towards a business transformation.”

Shares, having gained 5.5 per cent on Thursday, were up a further 3.3 per cent to £23.89.

BAE Systems was thrust to the bottom of the FTSE 100 after talks to supply 60 Typhoon fighter jets to the UAE failed. The shares fell 4.5 per cent to 422.1p as concerns also rose over price negotiations with Saudi Arabia, which had already agreed to buy 72 fighters.

WPP, the UK advertising agency, said its Mindshare division had agreed to buy Philippine media planning company MASSCOM, which had previously delivered services exclusively to British household goods group Unilever in the Philippines. No financial details were released and the shares rose 0.3 per cent to £13.50.

Severn Trent, the water and waste utility, completed its full acquisition of three subsidiary companies it had previously jointly owned with engineering group Costain. Shares in Severn Trent were down 1.8 per cent to £16.61.

There were a few flurries of deal activity lower down the market also.

Shares in Rentokil Initial, the outsourcing company, edged 0.9 per cent higher to 114p after it announced it had acquired the pest control division of Green Compliance for £4m. Meanwhile, property group Hammerson edged 0.5 per cent lower to 498.9p after it sold the Queensgate Shopping Centre in Peterborough, which it jointly owns with Aviva, for £202m to Invesco Real Estate. Shares in Aviva climbed 0.8 per cent to 439.3p.

At the end of the session, the FTSE 100 finished the week at 6,606.58, up 0.3 per cent on the day and 2.6 per cent over the week. The FTSE 250 was 0.3 per cent higher at 15,636.59, a gain of 2.6 per cent over the week.

Flush from gains in the previous session, William Hill was in the losing column of the FTSE ledger on Friday, falling 1.7 per cent to 384.5p after the Labour party targeted betting shops for criticism – particularly for running high-speed, large stakes gambling machines. Shares in rival Ladbrokes were down 0.1 per cent to 172.7p.

After some hefty falls earlier in the week, precious metals miners recovered a little ground on Friday as gold ticked a little higher on commodity exchanges – although it remained 3.5 per cent lower over the week.

African Barrick Gold added 3 per cent to 162.2p, but best performing among the mining companies was diversified group Vedanta Resources, which climbed 5.1 per cent to the very top of the FTSE 100 at 848.2p.

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