Carnival Forecasts 4Q Loss Amid Lower Bookings

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September 24, 2013

Carnival Triumph seen adrift in the Gulf of Mexico in February. Photo: U.S. Coast Guard

By Christopher Palmeri

Sept. 24 (Bloomberg) — Carnival Corp., the world’s largest cruise-ship operator, forecast fourth-quarter results that trailed analysts’ estimates amid a decline in advance bookings and higher fuel prices. The shares slumped.

The company said it expects that excluding some items, its fourth-quarter results will range from a loss of 3 cents a share to profit of 3 cents, according to a statement. That compared with the 9-cent average of analysts’ estimates, according to data compiled by Bloomberg.

Carnival, which made headlines this month when salvage crews off the coast of Italy righted the company’s shipwrecked Costa Concordia, said advance bookings for Carnival Cruise lines for the rest of 2013 and the first half of 2014 are lagging behind 2012’s, with prices remaining at last year’s levels. The company has estimated salvage costs at about 600 million euros ($810 million) though it has said most of it, as well as past and future claims, will be covered by insurance.

“Relatively soft first-half booking commentary and evidence of sustained booking pressure on its Carnival-branded ships will not be well received by investors,” Steven Wieczynski, an analyst at Stifel Nicolaus & Co., wrote in a note to investors. He recommends buying the shares.

Carnival expects full-year profit of $1.51 to $1.57 a share, from a prior forecast of $1.45 to $1.65. Analysts had estimated $1.55 a share, according to data compiled by Bloomberg.

The shares fell 6 percent to $35.15 at 10:40 a.m. in New York and earlier dropped 7.9 percent for the biggest decline since Jan. 17, 2012. They had gained 1.7 percent this year through yesterday. compared with a 19 percent advance for the Standard & Poor’s 500 Index.

Cruise Mishaps

In June, Chairman Micky Arison, the company’s largest shareholder, relinquished the role of chief executive officer, handing the duties to Arnold W. Donald, a director for 12 years.

Arison stepped aside after mishaps at sea led to worldwide publicity and forced the company to cut prices to fill berths. An engine-room fire on the Triumph in February left 3,100 passengers stranded at sea for days with limited food and toilet service. Separate incidents forced at least two other Carnival ships to cancel voyages and refund fares.

The company runs about 100 ships under 10 different brands, including Princess, Holland America, Costa and Cunard, according to its website.

Carnival is taking steps to improve its service, safety and environmental record after incidents like the January 2012 Costa Concordia wreck, which left 32 people dead. Those include plans to spend $180 million to reduce ship emissions, as much as $700 million to improve fire protection and backup systems on ships, and an expanded refund pledge for its flagship Carnival line.

Third Quarter

Third-quarter profit excluding certain items was $1.38 a share, from $1.53 a year earlier, the company said. Analysts were forecasting $1.29 a share, the average of 15 estimates compiled by Bloomberg.

Sales rose 0.9 percent to $4.7 billion in the quarter ended Aug. 31, the Miami-based cruise operator said, matching the $4.7 billion average of estimates. In June, Carnival predicted third- quarter profit of $1.25 to $1.33 a share.

Fuel prices increased 2.3 percent to $674 per metric ton in the third quarter, the company said.

Copyright 2013 Bloomberg.
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