By Steven Russolillo 

Carnival Corp. finally had regained steam nicely when Zika forced a course correction.

Concern that the mosquito-borne disease could hurt tourism have weighed on the sector in recent months. Shares of Carnival, the world's largest cruise-ship company, have underperformed the S&P 500 by some 18 percentage points since early April.

If this proves overblown, investors might have an opportunity, beginning Monday, when Carnival is expected to release results for its fiscal third quarter, which runs through August. Analysts polled by FactSet forecast earnings of $1.88 a share, up 8% from a year earlier. Revenue is expected to have increased 4% to $5.1 billion.

For one, Carnival was chugging along just fine until the Zika outbreak. Low fuel costs, higher prices and strong bookings have underpinned results in recent quarters for Carnival, operator of Carnival Cruise Line as well as the Princess, Cunard and Holland America lines.

That also helped burnish the reputation of CEO Arnold Donald, now more than three years into his tenure. Mr. Donald, the first boss who isn't part of the founding Arison family, has been a firm hand on the tiller following reputational issues such as the fatal Costa Concordia disaster in 2012 and ship fires in recent years. Up until April, Carnival shares had produced double the return of the S&P 500 under his leadership, reflecting cruising's popularity in North America and its potential in Asia.

The big picture hasn't changed in recent months. Naturally, Zika could grow even more serious, but there has been good news on that front of late. Florida authorities said last week that they don't believe mosquitoes are spreading the Zika virus in Miami's Wynwood neighborhood. And Walt Disney Co. CEO Robert Iger said at a conference last week that attendance at the Walt Disney World theme park in Orlando has seen "no impact" from Zika-related concerns.

Any confirmation from Mr. Donald that Carnival's bookings are holding up could give the undervalued stock a lift. Shares fetch 12 times projected earnings over the next 12 months, near their lowest since January 2012 and half the multiple's peak in early 2014.

This is no time to head for the lifeboats.

Write to Steven Russolillo at steven.russolillo@wsj.com

 

(END) Dow Jones Newswires

September 25, 2016 12:02 ET (16:02 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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