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A Mixed 1Q for Carnival

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Carnival Corporation (CCL - Free Report) reported its first-quarter fiscal 2013 adjusted earnings of 8 cents per share, ahead of the Zacks Consensus Estimate of 4 cents per share and the year-ago quarter’s earnings of 2 cents per share. The earnings in the quarter were also ahead of management’s guidance of 3−7 cents per share.

Total revenues in the quarter increased 0.3% year over year to $3,593 million but missed the Zacks Consensus Estimate of $3,634 million.

Net revenue yields (in constant currency) declined 2.3% year over year. At current dollars, gross revenue yields dropped 3.4%. Net cruise costs (in constant dollar), excluding fuel per available lower berth day (ALBD), also declined 2.3% year over year. Fuel price was $677 per metric ton in the quarter, down 4% year over year.

Segment Revenues

Passenger Tickets

Passenger Tickets revenue in the quarter declined 0.9% year over year to $2,740.0 million.

Onboard and Other

In the first-quarter of fiscal 2013, Onboard and Other revenues were $844.0 million, up 4.3% year over year.

Tour and Other

Revenue for the segment remained flat year over year to $9 million.

Liquidity Position

At the end of the first-quarter fiscal 2013, Carnival had cash and cash equivalents of $476 million versus $465 million in the previous quarter. Long-term debt was $7,622 million compared with $7,168 million in the fourth-quarter fiscal 2012.

Second Quarter 2013 Guidance

Management expects that net revenue yield (in constant dollar) will witness a fall in the second-quarter fiscal 2013. Net cruise costs per ALBD (in constant dollar), excluding fuel are projected to grow 9.5−10.5%.

Based on current fuel prices and currency exchange rates, the company expects adjusted diluted earnings to be within 4−8 cents per share in the second quarter.

Full Year 2013 Guidance Revised

Owing to the prevailing economic headwinds Carnival now expects net revenue yields for fiscal 2013 to be flat year over year compared with the previous guidance of up 1.0−2.0% (in constant dollar).

Carnival has raised its guidance for net cruise costs per ALBD (in constant dollar), excluding fuel, from 1.0−2.0% to 2.5−3.5%. Carnival’s cruise cost is expected to be high due to the recent voyage disruption.

Carnival now expects diluted earnings of $1.80-$2.10 per share down from the previous guidance of $2.20−$2.40 per share.

Our Viewpoint

Carnival is the largest and historically the most profitable cruise operator in the world. We believe that Carnival is recovering at a steady pace from the Costa disaster and we also expect the Costa cruises to swing back to profitability, moving forward. Carnival is also witnessing an increase in booking volumes.

However, the recent voyage disruption may hurt Carnival’s performance, going ahead. Moreover, the prevailing economic uncertainty and higher overall unit costs pose major threats to Carnival in 2013.

Carnival currently carries a Zacks Rank #3 (Hold). Some other stocks in the same sector that are going to perform well include Cedar Fair, L.P. (FUN - Free Report) , Speedway Motorsports Inc. (TRK - Free Report) and Churchill Downs Inc. (CHDN - Free Report) . Cedar currently carries a Zacks Rank #2 (Buy) while both Speedway and Churchill Down carry a Zacks Rank #1 (Strong Buy).

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