Carnival Reports 2017 Q3 Earnings

Carnival Corporation announced U.S. GAAP net income of $1.3 billion, or $1.83 diluted EPS, for the third quarter of 2017 compared to U.S. GAAP net income for the third quarter of 2016 of $1.4 billion, or $1.93 diluted EPS.

Third quarter 2017 adjusted net income of $1.7 billion, or $2.29 adjusted EPS, was higher than adjusted net income of $1.4 billion, or $1.92 adjusted EPS, for the third quarter of 2016.

Adjusted net income excludes unrealized gains on fuel derivatives of $65 million and impairments and other net charges of $395 million for the third quarter 2017 and net gains of $7 million for the third quarter 2016. Revenues for the third quarter of 2017 of $5.5 billion were higher than the $5.1 billion in the prior year.

Carnival Corporation & plc President and Chief Executive Officer Arnold Donald stated, “We delivered another consecutive quarter of strong operational improvement and another third quarter adjusted earnings record. Our ongoing efforts to create demand well in excess of measured supply growth helped to drive five percent higher cruise ticket pricing. We have many innovative efforts to accelerate demand in 2018 and beyond including our recently announced digital streaming channel, OceanView, and our mobile gaming portfolio, PlayOcean, both launching this week.”

The company will launch OceanView and PlayOcean at a public relations event in New York City’s Time Square on September 28th between 11 a.m. and 1 p.m.

Gross revenue yields (revenue per available lower berth day or “ALBD”) increased 5.5 percent. In constant currency, net revenue yields increased 5.1 percent for 3Q 2017, better than June guidance of up approximately 4.0 percent.

Gross cruise costs including fuel per ALBD increased 12.4 percent (including ship impairment charges). In constant currency, net cruise costs excluding fuel per ALBD increased 0.2 percent, in line with June guidance of approximately flat.

Changes in fuel prices (including realized fuel derivatives) and currency exchange rates decreased earnings by $0.03 per share.

Noncash impairment charges for ships, trademark and goodwill of $392 million driven by the company’s decision to strategically realign its business in Australia.

Donald commented, “After the earthquakes in Mexico and a very challenging series of hurricanes, our thoughts are with all of those impacted and we are actively contributing to the relief and rebuilding efforts in the Caribbean and the southern U.S. through monetary and other support. Many people throughout these areas have been impacted and several ports are temporarily unavailable. Fortunately, our owned destinations including Amber Cove, Dominican Republic; Cozumel, Mexico; Mahogany Bay, Honduras; Half Moon Cay and Princess Cays, Bahamas, as well as more than 40 other ports, plus all those in Mexico, are fully operational and welcoming guests.”

Donald added that several temporary port closures associated with the storms led to voyage disruptions which are expected to result in an estimated $0.10 to $0.12 per share reduction in earnings in the fourth quarter. The company has resumed normal operations, with some itinerary modifications and is continuing to deliver exceptional Caribbean cruise vacations to its guests.

At this time, the company said cumulative bookings for the first half of next year are well ahead of the prior year on both price and occupancy. Since June, booking volumes for the first half of next year have been running ahead of last year at prices that are well ahead.

Donald added, “Our record results, coupled with strong booking trends, have more than offset the anticipated earnings impact from these weather disruptions, enabling us to raise the mid-point of our guidance and positioning us to achieve the higher end of our previous earnings guidance range. Our performance affirms conviction in our company’s inherent ability to deliver sustained double digit return on invested capital in 2018 and beyond. We remain on track to achieve record cash from operations of $5 billion this year, and to continue to distribute cash to shareholders through steadily increasing dividends, currently totaling $1.2 billion annually, and opportunistic share repurchases, which are approaching $3 billion cumulatively over the past two years.”

Fourth quarter constant currency net revenue yields are expected to be up approximately 1.5 to 2.5 percent compared to the prior year.

Excluding the estimated impact from recent weather related voyage disruptions, fourth quarter constant currency revenue yields would have been expected to increase approximately 3.5 percent, 1.5 percent higher than the mid-point of September guidance. Net cruise costs excluding fuel per ALBD in constant currency for the fourth quarter of 2017 are expected to increase by approximately 6 to 7 percent compared to the prior year of which approximately 1.5 percent was due to the impact of the recent weather related voyage disruptions and nearly 3 percent will be due to higher dry-dock costs as previously anticipated.

Changes in fuel prices (including realized fuel derivatives) and currency exchange rates compared to the prior year are expected to decrease earnings by $0.04 per share. Based on the above factors, the company expects adjusted earnings per share for the fourth quarter 2017 to be in the range of $0.44 to $0.50 versus 2016 adjusted earnings per share of $0.67.

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