Carnival swung to a loss in its first quarter, stung by losing bets on future prices for fuel.
The cruise operator's adjusted results and revenue beat analysts' expectations, but it narrowed its full-year forecast and gave a second-quarter projection below Wall Street's view, pushing the stock price down almost 5 percent for the day.
“Pricing has been weak for a while now and a lot of it is with regard to their specific brand issues and operational issues,” Edward Jones analyst Robin Diedrich said.
Carnival is trying to bounce back from a series of high-profile incidents. It is contending with lawsuits stemming from a February 2013 Carnival Triumph cruise that went awry after a fire disabled the engine. And in 2012 the Costa Concordia hit a reef off Giglio island and killed 32 passengers and crew. Costa is a unit of Carnival.
Carnival has been using discounts to get passengers back onto its ships. It has also been reaching out to travel agents, launched a new ad campaign and issued a hassle-free vacation guarantee.
“We have increased our investment in advertising and expect to spend over $600 million in 2014. That is a 20 percent increase over 2012,” Chief Executive Arnold Donald said on a conference call with analysts.
First-quarter ticket prices were better than expected for Carnival Cruise Lines and its continental European brands, Arnold said. The company noted that booking volumes for the rest of the year are well ahead of 2013, but at lower prices.
One analyst questioned whether the cruise line would run the risk of passengers growing accustomed to promotional pricing, but chief financial officer David Bernstein pointed out that the operator has been bounced back from stretches of lower prices in the past.
“As the economy improves and if demand is there, we should be able to get pricing back without any problem,” Bernstein said. “This has happened a number of times in our history.”
In a note to investors, Morningstar equity analyst Jaime Katz agreed that the company should be able to command higher fares, but said “we are aware that this could take some time before confidence returns and consumers are willing to pay up materially.”
For the three months ended Feb. 28, Carnival Corp. lost $15 million, or 2 cents per share. That compares with a profit of $37 million, or 5 cents per share, a year earlier.
The latest quarter included $17 million of unrealized losses on fuel derivatives.
Carnival said fuel prices fell 3.4 percent from a year ago. However, the $654 per metric ton in the first quarter was higher than the company's previous forecast for $643 per metric ton.
Stripping out fuel's impact, the Miami company broke even on a per-share basis.
Analysts, on average, expected a loss of 8 cents per share, according to a FactSet poll. Revenue was nearly flat at $3.59 billion, but topped Wall Street's estimate of $3.56 billion.
Going forward, the cruise operator now expects 2014 adjusted earnings of $1.50 to $1.70 per share. Its prior outlook was for $1.40 to $1.80 per share. Analysts predicted earnings of $1.72 per share.
Carnival said its second-quarter results will range between an adjusted loss of 2 cents per share to an adjusted profit of 2 cents per share. Wall Street is calling for earnings of 7 cents per share.
Tuesday shares fell $1.98, or 4.95 percent, to close at $38.02.
Miami Herald staff writer Hannah Sampson contributed to this report, which was augmented by reporting from Reuters.