Carnival’s 3rd-quarter net income rises during strong summer season; lifts earnings forecast

Tuesday, September 21, 2010

Carnival’s 3Q net income up, boosts 2010 outlook

MIAMI — The busy summer season didn’t disappoint Carnival Corp., as better demand spurred rising prices and led to a 22 percent increase in its third-quarter net income.

The cruise operator also raised its full-year earnings forecast well above Wall Street’s expectations on Tuesday, sending its shares up 51 cents, or 1.4 percent, to $37.57.

The owner of Princess, Holland America and its namesake cruise lines earned $1.3 billion, or $1.62 per share, for the period ended Aug. 31. That’s up from $1.07 billion, or $1.33 per share, in the same period last year.

The performance easily surpassed the $1.47 per share predicted by analysts polled by Thomson Reuters.

Strong ticket prices and healthy demand during the traditionally strong summer season helped quarterly results, according to Chairman and CEO Micky Arison.

The summer is often a time for vacations, as many families plan their travels around the end of their children’s school year. Others like to build trips around the summer holidays and take advantage of the warm weather that typically sweeps across the U.S. and overseas.

JPMorgan’s Kevin Milota said Carnival’s performance also received a boost from cost cutting.

“We remain positive on cruise industry fundamentals and believe that all of the key buckets for Carnival outperformance are trending in the right direction,” the analyst wrote in a note to clients.

Milota reiterated an “Overweight” rating.

Revenue increased 7 percent to $4.43 billion, meeting Wall Street’s expectations. It was the third consecutive quarterly increase.

A key revenue metric also climbed 6.2 percent on a constant dollar basis, slightly above Carnival’s anticipated 5 percent to 6 percent increase. The figure measures net revenue yield, or the amount a cruise company makes from its passengers after removing expenses.

While fuel prices rose 17 percent to $473 per metric ton, they still came in lower than the $493 per metric ton that Carnival forecast in June.

Looking ahead, the company now expects 2010 net income of $2.48 to $2.52 per share, up from a prior guidance of $2.25 to $2.35 per share.

Analysts anticipate full-year earnings of $2.36 per share for the company based in Miami.

Carnival said booking volumes for the rest of 2010 and the first half of 2011 are ahead of 2009 at prices similar to a year ago.

“Consumers continue to embrace vacations as a much-needed escape from the rigors of daily life, while cruising remains an increasingly attractive option for those seeking greater value for their vacation dollar,” Arison said.

While consumers are still taking vacations during ongoing economic uncertainty, many have opted to take shorter trips or selected less expensive locations, such as the Caribbean, in an attempt to save some cash.

In the fourth quarter, Carnival foresees earnings between 32 cents and 36 cents per share. This is in range of the 36 cents-per-share estimate of analysts.

Chief Operating Officer Howard Frank said during Carnival’s conference call that the company has noticed higher pricing and slightly improved occupancy for its North American brands over the past six weeks. Prices are also up at its European brands, with occupancy at the same level as a year ago.

Carnival has 97 ships, with 11 new vessels expected to be delivered by May 2014.

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