Carnival’s Weak Forecast Overshadows Strong Results

 

By Yashaswini Swamynathan and Sruthi Ramakrishnan

Sept 22 (Reuters) – Carnival Corp, the world’s largest cruise ship operator, issued a profit forecast for the current quarter that missed analysts’ estimates, overshadowing better-than-expected third quarter results.

Carnival’s shares fell as much as 5.7 percent to $49.67 on a weak day for the broader market.

Like most U.S. corporations with large overseas operations, Carnival has been struggling with the effects of a strong dollar and sluggish global economy.

The company warned on Tuesday that geopolitical issues such as the migrant crisis in Europe could pose a challenge to pricing in the region.

However, Chief Executive Arnold Donald said the company’s strategy in the market has not changed. “It is not as if Europe is falling off a cliff or something,” Donald told Reuters.

Carnival forecast current-quarter adjusted earnings of 36-40 cents per share, below the 46 cents analysts were expecting on average.

“The fourth quarter was probably a little bit lighter than what people expected,” Morningstar Inc analyst Jamie Katz said, noting that Carnival has been conservative in its forecast in the past.

In the third quarter ended Aug. 31, tourists spent more aboard its cruises but a strong dollar reduced the value of overall ticket sales.

Carnival, which won U.S. approval to operate some ships in Cuba, said it has started bookings for next May, when it plans to start taking travelers to the country.

Americans are banned from going to Cuba as tourists but are allowed to go for a some approved motives such as visiting family or participating in academic, professional, religious or educational programs.

Donald added that he expects Cuban operations to materially impact revenue only after an embargo banning U.S. tourists to the island nation is lifted.

Total revenue fell 1.3 percent to $4.89 billion in the third quarter, the period when Carnival makes most of its annual earnings.

Ticket sales, which account for almost three-quarters of Carnival’s total revenue, fell 2.4 percent.

Net revenue yields, which measures the net revenue per available berth, rose 4.3 percent in constant currency, but fell 2.1 percent in current dollars.

Net income fell 1.6 percent to $1.22 billion, or $1.56 per share, in the quarter.

Excluding items, the company earned $1.75 per share.

Analysts on average had expected a profit of $1.63 per share and revenue of $4.82 billion, according to Thomson Reuters I/B/E/S. (Reporting by Yashaswini Swamynathan and Sruthi Ramakrishnan in Bengaluru; Editing by Ted Kerr and Saumyadeb Chakrabarty)

(c) Copyright Thomson Reuters 2015.