The peak summer season did not disappoint Carnival Corp., as strong ticket prices and lower-than-expected costs helped drive its third-quarter net income up 3 percent.
Despite the strong quarterly results, the Miami cruise operator cut the high end of its full-year earnings guidance on Tuesday in part because of fuel costs. But the trimmed outlook was largely shrugged off by investors in favor of a third-quarter performance that beat Wall Street's expectations.
Carnival, which runs 101 ships, with 10 new ships set to be delivered between April 2012 and March 2016, earned $1.34 billion, or $1.69 per share, for the period ended Aug. 31, up from $1.3 billion, or $1.62 per share, during the same period a year earlier. Revenue climbed 12 percent to $5.06 billion from $4.53 billion.
The results topped the predictions of analysts polled by FactSet, who expected earnings of $1.64 per share on revenue of $4.9 billion, on average.
Carnival's stock gained $1.63, or 5.1 percent, to close at $33.88 Tuesday. The shares have traded between $28.96 and $48.14 over the past year.
The performance is a good sign for the cruise industry, signaling that consumers were still willing to take vacations during the popular summer travel months even though uncertain economic conditions remained.
Revenue yields, which measure the amount a cruise company makes from its passengers after removing expenses, were better than expected in the quarter. North American revenue yields rose almost 6 percent, while European, Australian and Asian revenue yields dropped 2 percent mostly because of ongoing political unrest in the Middle East and North Africa.
The difficulties overseas are nothing new, as Carnival has said since at least March that problems in the Middle East and North Africa have led to slowing demand for itineraries there.
Total net revenue yields for the quarter climbed 2.6 percent, which was better than the company's outlook for an increase of 1 percent to 2 percent.
CEO Micky Arison said in a statement that better revenue yields help to offset a 45 percent increase in fuel prices.
Fuel prices rose to $686 per metric ton in the quarter compared with $473 per metric ton in the prior-year period. Chief Financial Officer David Berstein said during a conference call that this cost the company 23 cents per share in the quarter. That was somewhat offset by the weaker dollar, which had a favorable impact of 10 cents per share.
Carnival, which has brands that include Holland America Line, Princess Cruises and Carnival Cruise Lines, said cumulative advance bookings for the rest of the year and first half of 2012 are at higher prices with slightly lower occupancies compared with last year.
"Despite the uncertain economic environment, we have a strong base of business for the first half of 2012, and booking trends during the third quarter have been solid. The increased level of importance consumers are placing on value continues to drive demand for our cruise products," Arison said.
Vice Chairman and Chief Operating Officer Howard Frank said pricing for bookings-to-date for the first and second quarters are up compared with a year ago. Occupancy is flat for the first quarter and down for the second quarter, which is because cruise capacity is up about 4.6 percent for the first half of 2012.
Frank said that bookings and pricing for the first half of next year have fallen off a little in recent weeks, due to factors including the U.S. debt ceiling debate and worries about the strength of European banks. But he said that Carnival's business was still solid.
"Even during this difficult August and September period, bookings have held up quite well which is a testament to the resiliency of the cruise business," Frank said.
Carnival now anticipates earnings of $2.40 to $2.44 per share for the year. Its prior guidance was for earnings between $2.40 and $2.50 per share, which was adjusted in June from a previous forecast of $2.55 to $2.65 per share.
The cruise operator said changes in fuel prices and currency exchange rates are expected to lower its full-year earnings by 6 cents per share compared with its June forecast.
Analyst Kevin Milota of J.P. Morgan said in a client note that the revised forecast will probably "be viewed as `acceptable' by investors as expectations for the fourth quarter were lowered through the quarter (mostly currency driven)."
Carnival expects to earn 26 cents to 30 cents per share in the fourth quarter.
Analysts anticipate earnings per share of 36 cents for the quarter and $2.44 for the year.