A continuing battle with rising fuel costs, combined with political unrest in the Middle East and North Africa and the aftermath of Japan's earthquake and nuclear disaster, pushed Carnival Corp.'s net income down 18 percent in the second quarter.
The Miami cruise operator's quarterly performance beat analysts' expectations on Tuesday. The company also lowered its full-year earnings guidance below Wall Street's forecast mainly because of the bigger-than-expected impact of the Middle East and North Africa disruptions.
Climbing fuel prices have been a thorn in the side of cruise operators, airlines and other businesses. Carnival said higher fuel prices cost it about $150 million, or 19 cents per share, in the quarter. Fuel prices rose 35 percent to $673 per metric ton from $498 per metric ton a year earlier.
But fuel was not the only concern. Excluding fuel, net cruise costs increased 3 percent, with Senior Vice President of Finance and Chief Financial Officer David Bernstein saying during a conference call that Carnival is contending with increasing food costs, crew travel and other hotel costs.
Many businesses, like supermarkets and restaurants, are dealing with rising costs for food items, such as meats and corn. Better travel demand has also spurred higher hotel costs.
For the period ended May 31, Carnival earned $206 million, or 26 cents per share. That's down from $252 million, or 32 cents per share, a year earlier.
The result was still better than the 23 cents per share that analysts surveyed by FactSet predicted.
Carnival's stock gained $1.51, or 4.2 percent, to $37.24. The shares have traded from $29.68 to $48.14 over the past 12 months.
J.P. Morgan's Kevin Milota said in a client note that it was a good quarter for Carnival, but that the status of the overseas markets, volatile fuel prices and consumers' appetite for spending will remain variables.
Revenue rose 11 percent to $3.62 billion, exceeding Wall Street's estimate of $3.51 billion.
Carnival experienced strength in its North American brands, with revenue yields rising 3 percent. Revenue yields measure the amount a cruise company makes from its passengers after removing expenses.
While its European, Australian and Asian brands improved slightly, they were hampered by itinerary changes caused by events in the Middle East, North Africa and Japan.
The difficulties overseas are nothing new, as Carnival said in March that the problems in the Middle East and North Africa had led to slowing demand for itineraries there.
Vice Chairman and Chief Operating Officer Howard Frank said Tuesday that when Carnival gave its 2011 guidance in March the company "clearly underestimated the impact that the political unrest in the Middle East and North Africa would have on our business for the remainder of the year."
Carnival, whose brands include Carnival Cruise Lines, Holland America Line and Princess Cruises, now expects 2011 earnings of $2.40 to $2.50 per share. Previously, it expected between $2.55 and $2.65 per share.
For the third quarter, Carnival anticipates earnings of $1.60 to $1.64 per share.
Analysts forecast full-year earnings of $2.54 per share and third-quarter earnings of $1.74 per share.
The cruise operator maintained its position that advance bookings for the rest of 2011 show people are paying more for their cruises than last year but that occupancies are lower because of increased cruise capacity.
The economic recovery has allowed cruise operators to start raising ticket prices as people are again starting to spend more on travel.
Carnival operates 100 ships with eight new vessels set to be delivered between June and February 2015.