Carnival Shares Sink on Cut Profit Forecast for the Year

Company posts 2nd-quarter earnings beat

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Jun 20, 2019
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Cruise line operator Carnival Corp. (CCL, Financial) reported strong second-quarter results before the opening bell on Thursday, but cut its profit forecast for the year.

The Miami-based company, which offers leisure cruises to exotic destinations under 10 brands, posted adjusted earnings of 66 cents per share, topping Refinitiv’s estimates of 61 cents. Revenue grew 11% from the prior-year quarter to $4.84 billion, beating expectations of $4.53 billion.

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Despite the beat, shares slid 7% in premarket trading after the company cut its profit forecast for the year in anticipation of the effect the Trump administration’s travel ban to Cuba will have on its performance. Carnival said the ban will have an impact of 4 cents to 6 cents per share on full-year earnings.

In addition, rearranging the travel itinerary of its Carnival Vista ship, which added an extra day of sailing due to being unable to cruise at regular speeds, will affect profits by 8 cents to 10 cents.

In a statement, President and CEO Arnold Donald said the company expects lower ticket prices in the coming months as it faces issues in other regions, applying further pressure to earnings.

"Recent booking trends have been impacted by ongoing geopolitical and macroeconomic headwinds affecting our Continental European brands,” he said. “We continue to expect higher yields in our North America and Australia brands offset by lower yields in our Europe and Asia brands for the remainder of the year."

Lower net revenue yields, an important metric that includes bookings and on-board spending, in the second half of the year will dent earnings by another 10 cents to 12 cents.

Overall, Carnival is now guiding for full-year 2019 adjusted earnings in the range of $4.25 to $4.35 per share, down from an earlier forecast of $4.35 to $4.55.

Despite the dismal outlook, Donald is optimistic about the company’s prospects due to its “robust business model.”

“Over the past five years we have demonstrated our ability to overcome multiple headwinds and deliver strong operational improvement,” he said. “This year our growth has been hampered by a confluence of events, which we are focused on mitigating.”

With a market cap of $37.89 billion, shares of Carnival were trading around $47.72 on Thursday with a price-earnings ratio of 12.06, a price-book ratio of 1.51 and a price-sales ratio of 1.93. GuruFocus estimates the stock has declined 3% year to date.

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According to the GuruFocus Industry Overview page, Carnival is the fourth-largest company in the travel and leisure industry, behind Booking Holdings Inc. (BKNG, Financial), Las Vegas Sands Corp. (LVS, Financial) and Marriott International Inc. (MAR, Financial).

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Shares of rival cruise line operators Norewgian Cruise Line Holdings Ltd. (NCLH, Financial) and Royal Caribbean Cruises Ltd. (RCL, Financial), which is another top player in the travel and leisure space, also fell on Thursday.

Disclosure: No positions.

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