Friday, June 17, 2011

Carnival Corp. (NYSE: CCL): Q2 Earnings Preview 2011

Carnival Corporation (NYSE: CCL) is scheduled to release its fiscal first-quarter earnings before the opening bell on Tuesday, June 21, 2011. Analysts, on average, expect the company to report earnings of 23 cents per share on revenue of $3.52 billion. In the year ago period, the company reported earnings of 32 cents per share on revenue of $3.52 billion.

Carnival Corporation operates as a cruise and vacation company in the United States and internationally. The Company has a portfolio of cruise brands and is a provider of cruises to all vacation destinations.

In the preceding fiscal first-quarter, the Miami, Florida based company's net income wwas $152 million or 19 cents per share, compared to $175 million, or 22 cents per share, in the year-ago period. Revenue grew 8 percent to $3.42 billion from $3.18 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of $0.19 per share on revenue of $3.31 billion. 

The company recently announced that it expects additional costs for the second half of fiscal 2011, due to the conflicts in the Middle East and North Africa region, as well as the earthquake and nuclear disaster in Japan. The company noted that it will cost the company an additional $0.15 per share for the second half of 2011 as a result of over 300 deployment changes due to the tensions in these regions. Further, the increases in fuel prices, net of currency exchange rates, will cost the company about $0.05 per share for the same period. The company also noted that it will bear an additional $0.05 per share in costs to reflect the reduction in revenues due to the softness in bookings for the Southern Europe and UK markets. However, it expects to offset the effect of this cost in other cost areas of the business with the revenue performance for the North American brands remaining strong.

The cruise sector has also been struggling with currency fluctuations lately. With an increasingly international customer base, companies have become more susceptible to foreign currencies and an improving dollar which hurts their revenues.  Carnival does not hedge its exposure to rising fuel costs and more than half of its revenues come from passengers outside the U.S. As a result, the company’s result will be more negatively impacted by fluctuation in fuel expenses and currency exchange rates.

Looking ahead, the company is likely to benefit from a strong booking and pricing trend. Historically, demand for cruises has been the greatest during the third fiscal quarter, which includes the Northern Hemisphere summer months. Higher demand during the third quarter leads to increased net revenue yields. Accordingly, the company typically generates the highest earnings at this time of the year. 

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