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Carnival (CCL) Beats Q1 Earnings on Increased Revenues

Carnival Corp.CCL reported strong first-quarter results, wherein both earnings and revenues beat the respective Zacks Consensus Estimate.

The Miami-based cruise company's adjusted earnings per share of 39 cents surpassed the Zacks Consensus Estimate of 31 cents by 26%, as well as management's guidance range of 28 cents to 32 cents. Further, earnings surged 95% year over year.

Higher-than-expected revenues as well as revenue yields drove the substantial earnings growth. Quarterly earnings excluded net unrealized losses on fuel derivatives.

Total revenue increased 3.4% year over year to $3.65 billion on the back of higher passenger ticket revenues and increased onboard revenues. Revenues also beat the Zacks Consensus Estimate of $3.62 billion by 0.9%.

Net revenue yields (in constant currency) increased 5.7% year over year, better than the December guidance of 3.5-4.5% rise. Gross revenue yields, however, decreased 0.4% due to fluctuation in currency exchange rates.

Segment Revenues

Carnival earns revenues from its Passenger Tickets business, Onboard and Other as well as Tour and Other segments.

Passenger Tickets : Passenger Tickets revenues increased 3.3% year over year to $2.72 billion.

Onboard and Other : Onboard and Other revenues were $923 million, up 3.8% year over year.

Tour and Other : Revenues remained flat with the year-ago tally of $10 million.

Income & Expenses

Operating income came in at $434 million, a 63.2% year-over-year surge, driven by higher revenues and lower operating costs.

Net cruise costs (in constant dollar) per available lower berth day (ALBD) (fuel and impairments excluded) increased 1.6%. The rise was lower than the expected guidance of 2.5% to 3.5% growth. Gross cruise costs, including fuel per ALBD in current dollars, decreased 6%, supported by favorable changes in fuel prices.

Fiscal Second-Quarter 2016 Guidance

Fiscal second-quarter net revenue yields in constant dollar are expected to increase 1.5-2.5% from the prior year. Net cruise costs, excluding fuel per ALBD, are expected to grow 0.5% to 1.5% year over year on a constant dollar basis.

Based on the above factors, the company expects adjusted earnings per share within 34 cents to 38 cents.

Fiscal 2016 Guidance

The company raised the lower end of its full-year 2016 adjusted earnings per share expectation to $3.20 to $3.40 from $3.10-$3.40.

Based on current booking trends, the company expects full-year 2016 net revenue yields in constant currency to be up approximately 3% from the prior-year level.

The company expects net cruise costs excluding fuel per ALBD, on a constant currency basis, for full-year 2016 to be up nearly 2%.

Cumulative advance bookings for the rest of 2016 are well ahead of the year-ago level at marginally higher prices. Since January, booking volumes for the remainder of the year are ahead of last year's levels at higher prices.

Our Take

Carnival is well positioned as the global leader in the cruise industry with solid growth prospects. The company's brand-building efforts and other promotional activities are expected to boost bookings further. Meanwhile, its strategy to tap into the fast growing Asian market requires special mention.

However, higher operating costs associated with investments in technology and advertising remain a major headwind for the Zacks Rank #3 (Hold) company. Further, the strong dollar would continue to hurt near-term revenues.

Some stocks in the leisure and recreational industry that can be considered are Carmike Cinemas Inc. CKEC , Planet Fitness, Inc. PLNT and Vail Resorts Inc. MTN . While Carmike Cinemas sports a Zacks Rank #1 (Strong Buy), Planet Fitness and Vail Resorts carry a Zacks Rank #2 (Buy).

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CARNIVAL CORP (CCL): Free Stock Analysis Report

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PLANET FITNESS (PLNT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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