What happened

Cruise ship giant Carnival (NYSE:CCL) underperformed a strong market last month as the stock fell 11%, versus a 7% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

The slump added to a weak period for shareholders, with the stock in negative territory so far in 2019, compared with an over 15% gain in the broader market.

A cruise ship sitting near an island.

Image source: Getty Images.

So what

Investors reacted harshly to the company's fiscal second-quarter report that included its second consecutive guidance downgrade. While Carnival's ships sailed at capacity and saw robust onboard spending, future bookings were weak in a few geographic markets, leading the company to project flat net cruise yields, a sharp slowdown from 2018's 4% increase.

Now what

CEO Arnold Donald and his team expressed confidence in late June that the business will quickly adjust to the new industry dynamics, in part by relocating ships in more high-demand areas like the Caribbean. But Carnival will likely come up well short of its goal of double-digit annual earnings gains this year as profits are projected to rise by just 5%, versus 12% last year.

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