The stock market has been recovering lately as better-than-expected third-quarter earnings reports boosted investor sentiment. However, the overall economic backdrop remains unfavorable for the stock market.
“Our guess is that earnings will be good enough to keep the market in a trading range but not enough to send it back up to its midsummer high, and given the lagged nature of monetary policy, we would argue that time is not on the market’s side,” Michael Shaoul of Marketfield Asset Management said.
Despite the Fed’s aggressive efforts to tamp down inflation, it is expected to remain elevated as supply chain issues persist. Many believe it might be a while before prices really come down from the highs.
Philadelphia Federal Reserve President Patrick Harker recently said higher interest rates had done little to keep inflation in check, so more increases will be needed.
Given this backdrop, we think fundamentally weak stocks Carnival Corporation & plc (CCL), AMC Entertainment Holdings Inc. (AMC), and Paya Holdings Inc. (PAYA) are not worth investor attention.
Carnival Corporation & plc (CCL)
CCL operates as a leisure travel company. Its ships operate under the Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises (Australia), Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK), and Cunard brand names.
In August, it was reported that CCL’s Princess cruises canceled 11 sailings aboard the Diamond Princess. The company stated that the company faced labor issues as travelers flocked back to cruises post-pandemic.
In the third fiscal quarter that ended August 31, CCL’s operating costs and expenses increased 76.1% year-over-year to $4.59 billion. Its operating loss came in at $279 million, while its adjusted net loss amounted to $688 million. The company’s loss per share amounted to $0.65.
Analysts expect CCL’s EPS to be negative $0.86 for the fiscal fourth quarter ending November 2022.
The stock has declined 63.3% over the past year to close its last trading session at $8.20. It has plunged 59.2% year-to-date.
This bleak outlook is reflected in CCL’s POWR Ratings. The stock has an overall D rating, which equates to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CCL is graded an F in Stability and Sentiment and a D in Quality. It is ranked #2 out of the four stocks in the F-rated Travel - Cruises industry.
In addition to the POWR Rating grades we’ve stated above, one can see CCL’s Value, Growth, and Momentum ratings here.
AMC Entertainment Holdings Inc. (AMC)
AMC owns, operates, and has interests in theaters in the United States and worldwide. The company provides theatrical exhibitions, movie screenings, food distribution, online ticket booking, and other related services through its subsidiaries.
On October 20, AMC’s Subsidiary Odeon Finco PLC announced that it had completed its private offering of $400.0 million aggregate principal amount of 12.750% senior secured notes due 2027 at an issue price of 92.00%.
AMC’s operating costs and expenses rose 59.5% from the year-ago value to $1.18 billion in the second quarter ended June 30, 2022. The company’s operating loss amounted to $16.10 million, while its net loss and net loss per share came in at $121.60 million and $0.24, respectively.
Analysts expect its EPS to decline 54.6% year-over-year to negative $0.17 for the fourth fiscal quarter ending December 2022. Additionally, AMC has failed to surpass the consensus EPS estimates in each of the trailing four quarters.
The stock has declined 83.5% over the past year to close its last trading session at $6.49. It has declined 24.5% over the past month.
It is no surprise that AMC has an overall D rating that translates to Sell in our POWR Ratings system.
AMC has been graded an F for Stability and a D for Sentiment. Within the F-rated Entertainment – Movies/Studios industry, it is ranked last of five stocks.
To see additional POWR Ratings for Growth, Quality, Value, and Momentum for AMC, click here.
Paya Holdings Inc. (PAYA)
PAYA operates as an independent integrated payments platform that processes payments through credit and debit cards, automated clearing houses, and check payments. It operates through two segments, Integrated Solutions, and Payment Services.
For the second fiscal quarter ended June 30, PAYA’s selling, general & administrative expenses increased 9.6% year-over-year to $22.80 million. Its adjusted net income decreased 10.9% from the prior-year quarter to $12.20 million. The company’s adjusted earnings per share fell 9.1% year-over-year to $0.10.
The company’s trailing-12-month ROCE, ROTC, and ROTA of 2.11%, 3.18%, and 0.79% compare to the industry average of 6.51%, 3.80%, and 2.25%, respectively, indicating weaker profitability.
In terms of forward non-GAAP P/E, PAYA is trading at 19.71x, 13.8% higher than the industry average of 17.31%. Moreover, PAYA’s forward P/Sales of 3.51x is 42.1% higher than the industry average of 2.47x.
The stock has declined 23.8% over the past year to close its last trading session at $7.49.
PAYA’s bleak prospects are reflected in its POWR ratings. The stock has an overall D rating, equating to Sell in our POWR Rating system.
PAYA has a grade of D for Value, Momentum, and Quality. It is ranked #58 of 77 stocks in the D-rated Technology - Services industry.
Click here to see additional POWR Ratings for PAYA for Growth, Stability, and Sentiment.
CCL shares were trading at $8.07 per share on Monday morning, down $0.13 (-1.59%). Year-to-date, CCL has declined -59.89%, versus a -19.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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