Carnival Corp announced US GAAP net income of $451 mill, or $0.65 diluted EPS, for the second quarter of 2019, compared to US GAAP net income of $561 mill, or $0.78 diluted EPS, for 2Q18.
Adjusted net income was $457 mill for 2Q19, or $0.66 adjusted EPS, compared to adjusted net income of $489 mill, or $0.68 adjusted EPS, for 2Q18.
The adjusted net income excluded net charges of $6 mill for 2Q19 and net gains of $72 mill for the same quarter of 2018 relating to unrealised gains on fuel derivatives and other net gains.
Total revenues for 2Q19 were $4.8 bill, higher than the $4.4 bill reported for the previous year. Gross cruise revenues were $4.8 bill compared to $4.3 bill for 2Q18. In constant currency, net cruise revenues were $3.8 bill, compared to $3.6 bill, an increase of 5.2%.
The company said that it expected full year 2019 adjusted earnings per share to be in the range of $4.25 to $4.35, compared to March guidance of $4.35 to $4.55, due to:
- $0.08 to $0.10 per share unfavourable impact resulting from voyage disruptions related to‘Carnival Vista’ (see elsewhere).
- $0.04 to $0.06 per share unfavourable impact resulting from the US.government’s policy change on travel to Cuba.
- $0.10 to $0.12 per share unfavourable impact resulting from lower net revenue yields in the second half of the year.
- Partially offset by lower fuel consumption and the net favourable impact from changes in fuel prices and currency exchange rates, compared to the March guidance.
Carnival Corp’s President and CEO, Arnold Donald (pictured), said, “Second quarter earnings included revenue growth from higher capacity and improved onboard spending, more than offset by a drag from fuel and currency, compared to the prior year. Second quarter adjusted earnings were better than March guidance by $0.08 per share substantially due to the timing of expenses between quarters.”
Highlights from the second quarter included Princess Cruises’ announcement that MedallionNet™, its fast and reliable Wi-Fi at sea, will be enjoyed by guests sailing on more than half of its fleet by the end of 2019.
‘Carnival Sunrise’ and ‘Carnival Freedom’ underwent multi-million-dollar renovations, which added a variety of experiences, including enhanced dining options, expanded retail spaces, etc.
Carnival Cruise Line also partnered withchef and restaurateur Emeril Legasse on his first-ever seagoing restaurant on board‘Mardi Gras’.
As of June, cumulative advanced bookings for the remainder of the year are slightly ahead of 2018 at prices that are in line with the previous year on a comparable basis. Pricing on bookings taken since March had been running behind the previous year on lower booking volumes in part because the company had less inventory remaining for sale.
Cumulative advanced 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 macro-economic 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.”
Voyage disruptions related to‘Carnival Vista’are expected to have a financial impact of around $0.08 to $0.10 per share.
The US government’s policy change on travel to Cuba has a financial impact of about $0.04 to $0.06 per share. While the company was able to quickly adjust its itineraries, the suddenness of the regulatory change to this high yielding destination led to a near-term impact on revenue yields.
In addition, the company is adjusting its full year net revenue yield guidance by 50 basis points, mainly due to lower ticket prices forecast in the second half of the year, resulting primarily from ongoing headwinds faced by the company’s Continental European brands.
The decline in revenue yields is mostly offset by $0.02 per share impact from lower fuel consumption and a net favourable $0.08 per share impact from changes in fuel prices and currency exchange rates since the time of the March guidance.
Based on current booking trends, the regulatory change and voyage disruptions, the company now expects full year 2019 constant currency net cruise revenues to be up around 4.5%, with capacity growth of about 4.5%t. the prior year
Net revenue yields in constant currency are expected to be in line with 2018 and compared to the March guidanceup by about1%. Net revenue yields in constant currency are expected to be flat to down slightly for the third quarter and lower for the fourth quarter when compared to the previous year.
The company said that it now expects full year net cruise costs excluding fuel per ALBD in constant currency to be up by around 0.7%, compared to 2018. The 0.2% increase compared to the March guidance is due to the voyage disruptions.
Taking the above factors into consideration, the company expects full year 2019 adjusted earnings per share to be in the range of $4.25 to $4.35, compared to the March guidance of $4.35 to $4.55 and 2018 adjusted earnings per share of $4.26.
Donald concluded, “Over the past five years we have demonstrated our ability to overcome multiple headwinds and deliver strong operational improvement. This year our growth has been hampered by a confluence of events, which we are focused on mitigating. Generating over $5 bill of cash flow and with a robust business model, our business is strong and we remain confident over time we will deliver double-digit earnings growth and growth in return on invested capital.”