Sea Containers Rides A Wave

A funny thing happened to Sea Containers during the Persian Gulf hostilities: Earnings came under tremendous pressure as trade and travel slackened, but its stock kept going up. Earnings in the final quarter of 1990 fell to 25~ a share from 67~ a year ago, and 1991's first quarter is expected to be in the red. Yet Sea Containers' stock soared from 34 in December to 55 on Apr. 9.

Clearly, investors were betting that once the war ended, the prospects for Sea Containers, which leases specialized marine containers, operates high-speed ferries, and owns hotels in Venice, Cape Town, and Rio de Janeiro, would improve markedly. "And they definitely will," says investment manager Graham Tanaka, who sees earnings rebounding sharply in 1992.

Analyst Mike Carstens of Tucker Anthony agrees. The rebuilding of Kuwait, economic recovery in Britain, and renewed world trade growth are likely to boost Sea Containers' earnings this year to $9 a share, he estimates. In 1992, he sees profits of $12 to $13 a share, as recoveries in the U. S. and Britain get under way.

Last year, the drop in the travel and hotel business, plus the rise in the cost of aviation fuel, which the company's Hovercraft ferries use, exacerbated the already bad effects of the soft economies in the U. S. and Britain, explains Carstens. But he expects earnings will jump starting in the third quarter. Sea Containers has sold certain assets as part of a restructuring designed to thwart possible takeover attempts. On the basis of its earnings alone, he says, the stock is worth $100 a share.

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