Carnival Earnings Helped by Lower Costs, Strong Bookings -- Update
June 28 2016 - 2:48PM
Dow Jones News
By Tess Stynes
Carnival Corp. said its earnings soared in its latest quarter as
the cruise-ship company benefited from lower costs and
better-than-expected revenue.
Shares fell 40 cents to $43.24 in recent trading. Earlier
Tuesday, the stock rose as much as 5.8% as the company's per-share
earnings, excluding certain one-time items, topped
expectations.
"This is shaping up to be another strong year," Chief Executive
Arnold Donald said in prepared remarks Tuesday touting its recent
dividend increase and the board's approval on Monday of the
repurchase of an additional $1 billion shares of the company's
stock.
Shares of Carnival Corp. have declined 12%, along with the
broader travel sector, since Britain's vote to leave the European
Union last week.
Carnival did project earnings for the current quarter below
analysts' expectations. The company forecast per-share earnings of
$1.83 to $1.87, while analysts polled by Thomson Reuters expected
per-share profit of $1.98.
Carnival, which is dual-listed in the U.S. and the U.K., has
benefited in recent quarters from low fuel prices, higher prices
and strong bookings.
In its press release Tuesday, Carnival said bookings for the
rest of the year are well ahead of the prior year at slightly
higher prices. The company, which operates Carnival Cruise Lines as
well as the Princess, Cunard and Holland America lines, also said
that since March, bookings have been at higher prices but volumes
have been running lower because there is less available inventory
remaining this year.
Bookings for the first three quarters of 2017 already are ahead
of schedule, Carnival CFO David Bernstein added on a conference
call with analysts, although he cautioned it is still early
going.
Customers booking months in advance should help cushion some of
the current market volatility due to the United Kingdom's decision
to exit the European Union last week.
The British pound accounts for 30% of the company's currency
exposure, something that could impact earnings if its valuation
stays depressed. Factoring in all currencies, Carnival expects a
full-year impact of 27 cents a share for a 10% change in all
currencies relative to the U.S. dollar.
"All things considered, bookings for our ships sailing to Europe
has held up well," said Mr. Donald on the call. And strength in
both the Caribbean and Alaska this year should help improve yields,
allowing the company to uphold its promise boost earnings by more
than 20% in 2016.
Still, the company plans to reduce European capacity by about 5%
in favor of growing more in the burgeoning Chinese market.
Mr. Donald said that China continues to be a promising source
for long-term growth within the cruise industry. The company plans
to increase capacity by more than 30% in 2017, compared with a 60%
increase this year. Still, China represents only about 5% of the
company's global capacity, something expected to grow to 6% next
year.
For the period ended May 31, Carnival reported a profit of $605
million, or 80 cents a share, up from $222 million, or 29 cents a
share, a year earlier. Excluding fuel-hedging impacts and other
items, per-share earnings rose to 49 cents from 25 cents. The
company had forecast adjusted per-share profit of 34 cents to 38
cents.
Revenue increased 3.2% to $3.7 billion. Analysts had expected
revenue of $3.68 billion.
Excluding currency effects, net revenue yields -- a measure of
revenue relative to capacity -- rose 3.6%, above the company's
guidance for an increase of 1.5% to 2.5%.
Excluding fuel expenses, net cruise costs decreased 1.9%,
compared with estimates for an increase of between 0.5% and 1.5%.
The company attributed the lower costs to a shift in the timing of
expenses.
For the fiscal year ending in November, the company narrowed its
per-share earnings estimate to $3.25 to $3.35 on a 3.5% increase in
net revenue yields, excluding currency fluctuations. The company
previously had projected per-share profit of $3.20 to $3.40 and net
revenue yield growth of roughly 3%, excluding currency
fluctuations.
Write to Tess Stynes at tess.stynes@wsj.com
(END) Dow Jones Newswires
June 28, 2016 14:33 ET (18:33 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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