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Carnival Expected to Meet the High End of Guidance

Carnival Expected to Meet the High End of Guidance

We believe Carnival s second-quarter EPS will meet our estimate of $0.02, at the high end of management s guidance for a loss of $0.02 to a profit of $0.02 and in line with consensus. We expect Carnival will report earnings late the week of June 23.

We project a 3% increase in revenue, to $3.58 billion, modestly below consensus of $3.61 billion, on a constant-currency net yield decline of 3%, at the better end of guidance of -3% to -4%, as positive yields in European brands are more than offset by negative yields for North American brands. The company faces tougher comparisons for its Carnival brand in the second quarter as bookings for the period were mostly complete before voyage disruptions last year that resulted in negative publicity.

We anticipate net cruise costs excluding fuel will rise 2.5% to 3.0% on a constantcurrency basis, at the lower end of guidance for a 2.5% to 3.5% increase and marking a modest deceleration from the first quarter s 3.3% increase. Our pricing research suggests improving trends for the Carnival brand through May, although Costa pricing remains somewhat volatile, with strong increases in April and May followed by a weak start to June.

Regionally across all brands, pricing in the Mediterranean appears strongest, followed by Alaska, for which pricing rebounded in May after softer results in March and April. As expected, Caribbean pricing is weakest, although it appears trends have improved as the Carnival brand has lapped the Triumph incident. We expect third-quarter EPS guidance to encompass our estimate of $1.53 as well as consensus of $1.51. We expect net yields to inflect into positive territory (including positive results in North American brands) given the lapping of pre-Triumph bookings last year and increased marketing efforts, and project an approximate 2% constant-currency net yield increase. We also expect constant-currency net cruise costs (excluding fuel) to continue to moderate sequentially, and project an approximate 1.0% increase. For the full year, we expect management will reiterate or narrow its previous guidance range of $1.50 to $1.70, encompassing our estimate of $1.60, up 1% and versus consensus of $1.72. We continue to project a full-year constant-currency net yield decline of 0.5% to 1.0% (versus guidance for a slight decline).

Carnival Expected to Meet the High End of Guidance

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