Carnival Corporation & plc announced non-GAAP net income of $159 million, or $0.20 diluted EPS, for the first quarter of 2015 compared to non-GAAP net loss for the first quarter of 2014 of $3 million, or $0.00 per share.
For the first quarter of 2015, U.S. GAAP net income, which included unrealized losses on fuel derivatives of $112 million, was $49 million, or $0.06 diluted earnings per share.
For the first quarter of 2014, U.S. GAAP net loss was $20 million, or $0.03 diluted loss per share.
Revenues for the first quarter of 2015 were $3.5 billion compared to $3.6 billion in the prior year.
Carnival Corporation & plc President and Chief Executive Officer Arnold Donald noted: “The year is off to a strong start achieving significantly higher earnings than the prior year and our previous guidance. Our onboard revenue initiatives drove particularly strong improvement in the first quarter with onboard yields more than 8 percent higher than prior year (constant dollar).”
Donald also noted that the Carnival Cruise Line brand continued to outperform, achieving significant revenue yield growth and remains on track for a strong year. Additionally, Costa’s Asia operations achieved double-digit revenue yield growth, affirming the pent-up demand in the region and building confidence in the long-term potential for growth.
Key metrics for the first quarter 2015 compared to first quarter 2014 were as follows:
On a constant dollar basis, net revenue yields (net revenue per available lower berth day or “ALBD”) increased 2.0 percent for 1Q 2015, which was better than the company’s December guidance of flat to up 1 percent. Gross revenue yields decreased 3.1 percent in current dollars due to changes in currency exchange rates.
Net cruise costs excluding fuel per ALBD increased 2.4 percent in constant dollars primarily due to higher dry-dock costs and advertising expenses. Costs were lower than December guidance, up 5.5 to 6.5 percent, substantially all due to the timing of expenses between quarters. Gross cruise costs including fuel per ALBD in current dollars declined 9.6 percent due to changes in fuel prices and currency exchange rates.
Fuel prices declined 38 percent to $406 per metric ton for 1Q 2015 from $654 per metric ton in 1Q 2014.
Fuel consumption per ALBD decreased 3.7 percent in 1Q 2015 compared to the prior year.
Changes in currency exchange rates reduced earnings by $0.06 per share (constant currency).
2015 Outlook
At this time, cumulative advance bookings for the remainder of 2015 are ahead of the prior year at higher prices. Since January, booking volumes for the remainder of the year are running in line with last year’s historically high levels at higher prices.
Donald noted, “We are experiencing an ongoing improvement in underlying fundamentals based on our successful initiatives to drive demand. Our efforts to further elevate our guest experience are clearly resonating with consumers and, notably, improving the frequency and retention of our loyal guests.” Donald added.
“We are also seeing results from our ongoing public relations efforts and creative marketing campaign designed to attract new to cruise. Our multifaceted campaign built around the Super Bowl garnered 5 billion media impressions before the commercial aired and has exceeded 10 billion impressions to date.”
Donald also noted that the recent delivery of Britannia, the largest cruise ship built for Britain and christened by Her Majesty Queen Elizabeth II, drew international acclaim and showcased cruising on a global scale.
Based on current booking strength, the company expects full year 2015 net revenue yields to increase 3 to 4 percent on a constant currency basis, which excludes translation and transactional currency impacts, compared to the prior year.
This is one full point better than December guidance on a constant currency basis. On a constant dollar basis, which does not exclude the unfavorable transactional impact of currency, the company still expects yields to be approximately 2 percent higher than the prior year.
The company expects net cruise costs excluding fuel per ALBD for full year 2015 to be up 2 to 3 percent compared to the prior year on a constant dollar basis, which is better than December guidance of up 3 percent, due primarily to the favorable transactional currency impact.
Since December, unfavorable changes in currency exchange rates (constant currency) have reduced full year 2015 earnings expectations by $219 million, or $0.28 per share. However, this impact has been significantly offset by the improvement in the company’s operating performance, resulting in just a $0.05 reduction to the midpoint of December guidance.
Taking the above factors into consideration, the company forecasts full year 2015 non-GAAP diluted earnings per share to be in the range of $2.30 to $2.50, compared to 2014 non-GAAP diluted earnings of $1.93 per share.
Looking forward, Donald stated, “Consistent with many global companies, the strengthening of the U.S. dollar has hampered our full year earnings expectations, masking the 3 to 4 percent (constant currency) yield increase our collective brands are expecting to achieve. Our successful initiatives to drive both ticket and onboard revenue yields have improved our financial performance and we remain on track toward our goal of achieving double-digit return on invested capital in the next three to four years.”
Second Quarter 2015 Outlook
Second quarter constant dollar net revenue yields are expected to increase 2 to 3 percent compared to the prior year. Net cruise costs excluding fuel per ALBD for the second quarter are expected to be up 6.5 to 7.5 percent on a constant dollar basis compared to the prior year.
The increase is driven by higher annual dry-dock costs primarily all of which will be incurred in the second quarter. Changes in fuel prices net of fuel derivatives and currency exchange rates (constant currency) are expected to benefit second quarter earnings by $74 million compared to the prior year, or $0.09 per share.
Based on the above factors, the company expects non-GAAP diluted earnings for the second quarter 2015 to be in the range of $0.11 to $0.15 per share versus 2014 non-GAAP earnings of $0.09 per share.
