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Carnival Corporation

(CCL) - Get Carnival Corporation Report

shares were down 4.46% in pre-market trading after they lost 7.65% Tuesday, as a Morgan Stanley downgrade added to the burden for the cruise ship operator.

Morgan Stanley lowered its recommendation to "underweight" from "equal weight" while slashing its 2014 earnings estimate for the Miami and London-based cruise ship operator by 28% to $1.60 a share.

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Carnival reported third quarter results Tuesday of $1.38 per share, excluding one-time items, which was above guidance of $1.25-$1.33 and consensus estimates of $1.30 per share, according to Morgan Stanley's report.

Forward guidance, however, was disappointing, according to Morgan Stanley's analysts, who wrote, "we simply find the valuation too steep, with a 2014 P/E of 22-23x and 17-18x in 2015, despite factoring in solid yieldgrowth (2014 +1.5% with 2H14 +5%, 2015 +4%), and a 1% and 4% FCF yield respectively. Once again, investors need to look at least two years out to make the shares look cheap, assume a perfect recovery, and that there are no 'structural' issues causing the ongoing downgrades."


Written by Dan Freed in New York


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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.