Cruise operator Carnival Corp.'s shares plunged over 13 percent on Tuesday after a ship operated by one of its units struck a rock and capsized off the coast of Italy on Friday.
So far 11 people have been confirmed dead from the accident, in which the Costa Concordia, a giant ship carrying more than 4,200 people, was ripped open by rocks off a Tuscan island. About two dozen are still missing.
Shares of rival cruise operator Royal Caribbean Cruises Ltd. were down more than 5 percent.
Susquehanna Financial cut its rating on both stocks to "neutral" from "positive" due to the potential impact of the tragedy on the sector.
Carnival's long-term earnings power has declined roughly 5 percent as a result of the disaster, according to Nomura analyst Harry Curtis.
"It may take years to repair the brand damage that Costa has sustained and we expect higher costs for crew training, not to mention the uncertainty Carnival will suffer in the near term over insurance coverage, as well as its inadequate response to this tragedy," Curtis said in a research note.
A tarnished public image for Costa Cruises, owned by Carnival, could lead to market share gains for Royal Caribbean, Curtis added.
Carnival shares were down $4.62 at $29.66 in afternoon trading on the New York Stock Exchange, after touching a near-three-month low of $29.23. Royal Caribbean dropped $1.52 to $27.23.
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