Miami-based cruise company
) slid 3% despite the company reporting better-than-expected fiscal
second-quarter 2014 results. The company's weak guidance for the
upcoming quarter failed to boost investors' confidence.
Additionally, it seems that investors are aware of rising fuel
costs next quarter, which should dent profits.
The company's adjusted earnings of 10 cents per share surpassed the
Zacks Consensus Estimate of 2 cents as well as management's
guidance range of a loss of 2 cents to earnings of 2 cents.
Further, quarterly earnings were higher than the year-ago quarter
figure of 7 cents per share. Higher revenues,
better-than-expected revenue yields as well as lower than
anticipated cruise costs drove the year-over-year rise in earnings.
Second-quarter earnings excluded a net gain on vessel transactions
and net unrealized gains on fuel derivatives.
Total revenue in the quarter rose 4.4% year over year to $3.63
billion. Also, revenues beat the Zacks Consensus Estimate of $3.58
billion by 1.4%. Revenues in the quarter benefitted from higher in
cruise sales and onboard spending.
However, net revenue yields (in constant currency) declined 2.2%
year over year in the second quarter, better than the company's
guidance of 3.0-4.0% decline. Gross revenue yields (in current
dollars) also dropped 0.5%.
Carnival earns revenues from its Passenger Tickets business,
Onboard and Other as well as Tour and Other segments.
: Passenger Tickets revenues in the quarter increased 3.3% year
over year to $2.7 billion.
Onboard and Other
: Onboard and Other revenues were $905.0 million, up 7.9% year over
Tour and Other
: Revenues increased 11.1% year over year to $30.0 million.
Income & Expenses
Operating income was $155 million in the reported quarter, up 2.0%
year over year as a result of higher revenues.
Net cruise costs (in constant dollar) per available lower berth day
(ALBD) (fuel and impairments excluded) increased 1.2%, primarily
due to higher dry-dock costs, as well as advertising and promotion
expenses. However, costs improved from the company's March guidance
of 2.5% to 3.5%.
Carnival's ships have been facing one accident after another,
significantly affecting its performance. In order to recover, the
company has undertaken a series of initiatives. Although these
initiatives have pressured the company's profit - raising its costs
at the current level - these are expected to prove beneficial over
the long term.
Fuel price was $657 per metric ton in the quarter, down 3.7% year
over year, while fuel consumption declined 6.0% year over year.
However, fuel costs were higher than the company's March guidance
of $649 per metric ton.
Third-Quarter Fiscal 2014 Guidance
The company projects its fiscal third-quarter to be weak compared
to the prior year quarter levels. Carnival expects net revenue
yield (in constant dollar) to remain flat to down by 1% in
third-quarter fiscal 2014. Net cruise costs per ALBD (in constant
dollar), excluding fuel, are projected to increase
Based on higher costs and lower revenue yields, the company expects
its bottom line to be in the range $1.38-$1.44 per share in the
third quarter versus the year-ago earnings of $1.38 per share.
Full-Year Fiscal 2014 Guidance
For fiscal 2014, Carnival expects its earnings to be within
$1.60-$1.75. Earnings in fiscal 2013 were $1.58 per share.
The company's revenue yield is expected to be down slightly on a
year-over-year basis in 2014. Net revenue yields (in constant
dollar) were guided to be either flat or marginally up in fiscal
Carnival also expects net cruise costs, excluding fuel per ALBD (on
a constant dollar), to be flat to up slightly in fiscal 2014
compared with the year-ago levels. This guidance is lower as
compared to the company's expectations in March.
We believe Carnival's turnaround remains on track. The company's
several brand-building efforts and other marketing promotions are
expected to be beneficial. Carnival recently partnered Dr. Seuss
Enterprises to provide a variety of exciting and immersive dining
and entertainment experiences on its fleet of 24 "Fun Ships" as
part of its brand-building efforts.
Reduction in fuel consumption is another bright spot in Carnival's
report card. However, higher operating costs remain a major
headwind for the Zacks Rank #3 (Hold) company.
Some better-ranked stocks in the leisure and recreational industry
Six Flags Entertainment Corporation
Royal Caribbean Cruises Ltd.
Speedway Motorsports Inc.
). All these firms sport a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
CARNIVAL CORP (CCL): Free Stock Analysis Report
ROYAL CARIBBEAN (RCL): Free Stock Analysis
SIX FLAGS ENTMT (SIX): Free Stock Analysis
SPEEDWAY MOTORS (TRK): Free Stock Analysis
To read this article on Zacks.com click here.