Cruise and vacation operator Carnival Corp. & plc (CCL,CUK,CCL.L), Friday said its fourth quarter profit plunged from a year ago, reflecting discounted trips and weakening travel demand, that offset by lower fuel prices. Earnings and revenues, however, beat estimates for the quarter.
Carnival also warned that its profit level for the first quarter will be weaker than analysts currently expects, while forecasting full year 2010 profit at a level less than that of 2009. Currently shares are down on NYSE.
For the fourth quarter, net income of the Miami, Florida-based company dropped to $193 million or $0.24 per share from $371 million or $0.47 per share in the same quarter a year ago.
On average, 17 analysts polled by Thomson Reuters expected earnings of $0.20 per share for the quarter. Analysts' estimate typically excludes one-time items.
Carnival's revenue for the quarter decreased to $3.21 billion, compared to $3.30 billion in the year-earlier quarter, still beating Street forecast of $3.20 billion.
Net revenue yields, a key measure for cruise ships, representing ticket prices, were down 8.6% due to favourable exchange rates. Of the total revenues recorded during the quarter, $2.42 billion emanated from the selling of Cruise passenger tickets, while remaining $787 million arose from on board and other revenues. Net cruise costs per available lower berth day or ALBD for the fourth quarter declined 2%, without fuel and on contant dollar.
The company recorded a decline of 19.5% in the third quarter, with profit at $1.07 billion or $1.33 per share and in the second quarter reported a much higher drop of 32.3%, with profit at $264 million or $0.33 per share.
While admitting challenges due to weaker consumer spending, the company, however, tends to ignore those factors by indulging in anchoring more cruisers to its line-up. Recently, the company contracted Italian shipbuilder Fincantieri to construct a 130,000-ton, 3,690 passenger cruise ship for its Carnival Cruise Lines brand, scheduled to enter service in spring 2012. The company has also signed various other agreement to provide 17 additional cruise ships all scheduled to enter services between 2009 and 2012. Management feels these measures will prove worthy in the long run.
For the third quarter, Carnival recorded revenues of $1.76 billion, while for the second quarter revenues were at $2.95 billion. Amongst others in the industry, Royal Caribbean Cruises Ltd. (RCL) in its third quarter reported a profit that dropped to $230.40 million or $1.07 per share from $411.89 million or $1.92 per share, hurt by a drop in revenues, mainly due to pricing pressure on its softer fall season sailings. Revenues for the quarter was $1.76 billion.
For the quarter under review, operating income of Carnival was $294 million, compared to $450 million in the prior-year quarter.
Fuel price decreased 15% to $458 per metric ton from $538 per metric ton. Selling and administrative expenses increased to $424 million from $407 million in the year-earlier quarter.
Passenger carried during the quarter increased to 2,136 million from 1,966 million in the comparable quarter last year. Fuel consumption increased to 826 thousand metric tons from 795 thousand metric tons in the same quarter last year.
Commenting on the fourth quarter earnings, Micky Arison, chief executive officer said, "On significantly reduced global travel demand, net revenue yields for our North American brands fell 13% while our European brands' yields fell a more modest 6%. Despite an 8% capacity increase, the stronger performance of our European brands in this economic environment reinforces our strategy to expand our European presence, which will continue in 2010 with four of six newbuilds scheduled for our European brands.
Carnival also said it achieved $170 million or savings since the start of the year through cost containment measures, which was partially offset by pressure on net revenue yields.
For full-year 2009, net income plunged to $1.79 billion or $2.24 per share from $2.33 billion or $2.90 per share a year ago. Revenues were $13.16 billion compared to $14.65 billion for the prior year. Street expected earnings of $2.19 per share on revenues of $13.15 billion for the year.
Looking ahead to the first quarter, Carnival said it expects earnings in the range of $0.08 to $0.12 per share, down from $0.33 per share in 2009 which included $0.04 of nonrecurring gains. The forecast reflects current fuel prices and currency exchange rates. Wall Street currently expects earnings of $0.17 per share for the quarter.
First quarter constant dollar net revenue yields are expected to decline in the 3% to 4% range or flat to up slightly on a current dollar basis, compared to the prior year. Sequential improvement in net revenue yields is expected as the year progresses. Analysts' currently expect revenues of $3.15 billion for the quarter.
For full year 2010, Carnival said it expects earnings in the range of $2.10 to $2.30 per share compared to $2.24 per share recorded in 2009. Analysts currently expects earnings of $2.29 per share, with estimates ranging between $1.76 and $2.65 per share.
Net revenue is expected to increase a 2 to 3% on a current dollar basis, while net revenue yields are forecast to be flat to up slightly, as a result of favorable movements in currency exchange rates. Anlyasts' currently expects revenue of $14.47 billion for the fiscal.
The company noted that the forecast is based on it's assumption that the pent-up demand for vacation travel will continue stimulating strong booking volumes, while lower dry-dock costs and tight cost controls will bring down cruise costs excluding fuel to be down 1 to 2%, on a constant dollar basis.
Based on current spot prices for fuel, fuel costs for the year are expected to increase $368 million compared to 2009, costing $0.46 per share. This, however, is expected to be partially offset by favorable movements in currency exchange rates worth $0.08 per share.
Arison added that the company remains focused on cost controls and expect to reduce non-fuel costs on a per unit basis in 2010 in constant dollars.
On September 23, 2009, brokerage Credit Suisse Downgraded Carnival shares to 'Neutral' from 'Outperform,' with a mean target of $37.48. However, the brokerage raised its 2009 earnings per share estimate to $2.20 from $2.12, while maintaining its 2010 estimate of $2.30.
CCL is currently trading at $32.18, down $1.18 or 3.54%, on a volume of 6.23 million shares. In the last 52-week period, the stock traded in the range of $16.80 to $34.95, with a three-month average volume of 4.81 million shares.
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