Tourism & Cruises

CRUISE INDUSTRY

Carnival reports better-than-expected earnings for third quarter

 

Third-quarter profits were stable and revenues were down compared to 2011, but Carnival Corp.’s earnings beat expectations.

hsampson@MiamiHerald.com

In a positive sign for the shaken cruise industry, Carnival Corp. on Tuesday reported better earnings than the company or analysts had expected.

Net income was slightly down at $1.33 billion and revenues dropped from about $5.1 billion in the third quarter of 2011 to nearly $4.7 billion for the three months ending Aug. 31 this year. That $1.33 billion includes $136 million of unrealized gains through the company’s fuel derivatives program, which mitigates risk from fuel price hikes.

Excluding those unrealized gains, net income was $1.2 billion or $1.53 diluted earnings per share, higher than the previous forecast of $1.42 to $1.46 per share.

The Miami-based cruise giant also narrowed its full-year forecast to $1.83 to $1.87 per share, a more specific target than the previously released figure of $1.80 to $1.90 per share.

Executives said revenue yields, or the money made per berth per day, were down from a year ago but not as much as anticipated. While cruise prices have been lowered to stimulate demand, costs were also down and fuel consumption was reduced.

Cruise operators have struggled to return booking volumes and cruise prices to the levels where they were before the fatal Jan. 13 shipwreck of the Costa Concordia, owned by one of Carnival’s brands. Following the disaster in Italy, cruise lines were forced to significantly reduce prices to fill ships. Economic woes in Europe, where many cruise lines have extra capacity during the summer, have also proven challenging for Carnival.

But the company said recent trends have been promising: Excluding Costa Cruises, booking volumes for the rest of the year and first half of next year have increased 9 percent over the last six weeks compared to the previous year at similar prices. Costa has also seen a 9 percent year-over-year increase in booking volumes, but at lower prices.

“The pace of booking volumes remains healthy, enabling us to continue to catch up on occupancy levels, while pricing has gradually improved,” said Carnival Corp. Chairman and CEO Micky Arison in a statement. “Both of these trends leave us well positioned for a recovery in cruise ticket prices beginning in the second quarter of 2013.”

Matthew Jacob, senior cruise analyst at ITG investment research in New York, said cruise lines were forced to discount sailings for the third quarter to make up for the lull that followed the accident at the beginning of the year, which is peak booking season.

But Jacob said pricing looks much more stable in the future. “I think it speaks to the idea that trends further out, once you get past the negative impact of the accident, are better than people thought,” he said. “I think the industry is definitely poised for a return to growth next year, and potentially some solid growth.”

Carnival shares closed at $37.08, slightly higher than the previous day’s close.

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