Carnival beats Q2 forecasts but cuts outlook on Europe pricing

Carnival Corp. & plc shares tumbled 8% in pre-market trading Thursday as the company cut its full-year outlook on lower yields in Continental Europe and Asia, offsetting the strength in North America. This overshadowed a higher than expected second quarter profit.

Plus Cuba and Carnival Vista impact

Lower ticket prices in the second half, primarily in Continental Europe, Carnival Vista's voyage disruptions and the short-notice Cuba travel policy change all play into the reduced guidance.

Q2 adjusted earnings were $457m, or 66 cents per share, compared to guidance of 56 cents to 60 cents and Wall Street's 61-cent consensus, but lower than the $489m, or 68 cents EPS, a year ago. US GAAP net income was $451m, or 65 cents EPS, down from $561m, or 78 cents, in Q2 2018.

Total revenues were $4.8bn, higher than the $4.4bn in the prior year.

Full-year guidance goes to $4.25-$4.35

Carnival Corp. now expects full year 2019 adjusted earnings per share in the range of $4.25 to $4.35, compared to March guidance of $4.35 to $4.55.

This includes 8 cents to 10 cents per share from Carnival Vista voyage disruptions, 4 cents to 6 cents from the Trump administration's Cuba policy change and 10 cents to 12 cents from lower net yields in the second half. This is partially offset by lower fuel consumption and the net favorable impact from changes in fuel prices and currency exchange rates compared to March guidance.

Third quarter guidance

Q3 constant currency net revenue yields are expected to be flat to down slightly (flat to up slightly excluding the impact of voyage disruptions and Cuba change) compared to the prior year. Net cruise costs excluding fuel per available lower berth day in constant currency are forecast to be up 0.5% to 1.5%, while changes in fuel prices and currency exchange rates are expected to increase earnings by 3 cents per share.

The new guidance range is $2.50 to $2.54, lower than Wall Street's $2.68 outlook but up from 2018 adjusted EPS of $2.36.

'Second quarter earnings included revenue growth from higher capacity and improved on-board spending, more than offset by a drag from fuel and currency compared to the prior year,' Carnival Corp. President and CEO Arnold Donald said. Q2 adjusted earnings were better than March guidance by 8 cents per share substantially due to the timing of expenses between quarters.

'Geopolitical headwinds' in Continental Europe

At this time, cumulative advanced bookings for the remainder of the year are slightly ahead of the prior year at prices that are in line with the prior year on a comparable basis. Pricing on bookings taken since March has been running behind the prior year on lower booking volumes in part because the company had less inventory remaining for sale.

Cumulative advance bookings for the full year 2020 are well ahead at prices that are in line compared to 2019.

Donald added: 'Recent booking trends have been impacted by ongoing geopolitical and macroeconomic headwinds affecting our Continental European brands. We continue to expect higher yields in our North America and Australia brands offset by lower yields in our Europe and Asia brands for the remainder of the year.'

Posted 20 June 2019

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Anne Kalosh

Editor, Seatrade Cruise News & Senior Associate Editor Seatrade Cruise Review