Citi sees ‘exceedingly low’ chance of cruises paying full U.S. taxes

Citi says cruise operators Carnival (CCL), Royal Caribbean (RCL), Norwegian Cruise Line (NCLH), and Viking Holdings (VIK) traded down yesterday after Secretary of Commerce Howard Lutnick specifically referenced cruise lines when speaking of foreign entities bypassing taxes by operating under non-U.S. flags. The firm believes the likelihood of the cruise operators becoming full taxpayers “remains exceedingly low.” However, this is the wrong kind of attention for the companies and would put a “meaningful dent” in earnings and cash flow were this to come to fruition, the analyst tells investors in a research note. Citi believes a more plausible scenario would be for the cruise industry to pay some taxes as a way to “assuage the issue and perhaps reach a resolution. However, this is a situation that cruise operators have long fought to avoid, adds the firm.