Carnival Corp hit by higher currency and fuel costs

2019-03-31T20:59:44+00:00 March 31st, 2019|Finance|

Carnival Corphas announced US GAAP net income of $336 mill, or $0.48 diluted EPS, for the first quarter of 2019, compared to US GAAP net income for 1Q18 of $391 mill, or $0.54 diluted EPS.

First quarter 2019 adjusted net income was $338 mill, or $0.49 adjusted EPS, compared to adjusted net income of $375 mill, or $0.52 adjusted EPS, for 1Q18.

Adjusted net income excludes net charges of $2 mill for 1Q19 and net gains of $16 mill for 1Q18 relating to unrealised gains on fuel derivatives net of other charges. Revenues for 1Q19 were $4.7 bill, higher than the $4.2 bill recorded in the previous year.

Carnival CorpPresident and CEO, Arnold Donald (pictured), stated, “First quarter earnings included revenue growth from higher capacity and improved onboard spending, offset by the timing of cost increases and a drag from fuel price and currency compared to the prior year. First quarter adjusted earnings were better than the mid-point of December guidance by $0.07 per share.”

“For the full year, our earnings guidance now reflects $155 mill, or $0.22 per share, from fuel price and currency moving against us. Operationally, we continue to expect revenues and adjusted earnings per share improvementsin line with our December guidance. We expect adjusted earnings per share to be higher than the prior year, despite a $45 mill, or $0.06 per share, year over year drag from currency and the price of fuel,” he said.

At the end of March, Carnival said that cumulative advanced bookings for the remainder of 2019 were ahead of the previous year at prices that are in line with 2017 on a comparable basis.

As a result, even with higher capacity, there is less inventory remaining for sale than at the same time last year. Donald added, “Booking trends achieved during wave season rivalled last years’ historical highs and were consistent with the demand trends we experienced going into the year, building further confidence in our full year guidance.

“For our North America and Australia brands, our booked position is ahead of the prior year at higher prices while our Europe and Asia brands are well ahead of the prior year at lower prices. Our brands are strong and growing, including Continental Europe, where we continue to expect revenue growth driven by double-digit capacity increases,” he said.

Based on current booking trends, the company continues to expect full year 2019 constant currency net cruise revenues to be up by about 5.5%, with capacity growth of 4.6%, and net revenue yields in constant currency expected to be up by around 1%,  compared to 2017 driven by the NAA brands. The company continues to expect full year net cruise costs, excluding fuel per ALBD, in constant currency to be up about 0.5% compared to the prior year.

Taking the above factors into consideration, the company expects full year 2019 adjusted earnings per share to be in the range of $4.35 to $4.55, compared to December guidance of $4.50 to $4.80, due to changes in fuel price and currency exchange rates and 2018 adjusted earnings per share of $4.26.

Donald commented, “We believe we are on a path that includes delivering, over time, double-digit earnings growth and improving return on invested capital through a consistent strategy of creating demand in excess of measured capacity growth while leveraging our industry leading scale.The company invested more than $250 mill in share repurchases during the quarter, bringing the cumulative total to nearly $5 bill since late 2015.”