Carnival Corp. (CCL 49.60, -5.41, -9.83%), the world's largest cruise ship
operator, is trading sharply lower today after the company reported Q4 (Nov)
earnings this morning and provided Q1 (Feb) guidance. While the NovQ results
were largely sound, the FebQ guidance has sponsored some weakness in shares this
With operations in North America, Europe, Australia, and Asia, the company’s portfolio features Carnival Cruise Line, Holland America Line, Princess Cruises, Seabourn, AIDA Cruises (Germany), Costa Cruises, Cunard, P&O Cruises (Australia), and P&O Cruises (UK), as well as Fathom, the company's immersion and enrichment experience brand. Together, its cruise lines operate 105 ships with 242,000 lower berths that visit over 700 ports around the world. Twenty new ships are scheduled to be delivered through 2025.
Turning to the NovQ results, non-GAAP EPS grew 11% year/year to $0.70, which was above prior guidance of $0.65-0.69. Revenue rose 4.6% year/year to $4.46 bln, which in-line with market expectations. In terms of guidance, CCL expects Q1 (Feb) non-GAAP EPS of just $0.40-0.44 which is below market expectations. For all of FY19, CCL expects non-GAAP EPS of $4.50-4.80.
Gross cruise revenues rose 4.3% to $4.4 bln. Gross revenue yields (revenue per available lower berth day, or "ALBD") increased 1.9%. In 2018, CCL grew net cruise revenue (constant currency) by over 5%, achieving the highest revenue yields (constant currency) in company history and producing double-digit adjusted EPS growth despite a significant drag from fuel and currency.
Looking ahead to 2019, CCL reports that cumulative advance bookings for full year 2019 are considerably ahead of the prior year at prices that are in-line with the prior year. Pricing on bookings taken since September has been running in-line on a comparable basis to the prior year while booking volumes are significantly higher compared to the prior year. As a result, even with higher capacity, there is less inventory remaining for sale than at the same time last year.
CCL believes that it's poised to deliver another year of strong revenue and earnings growth, with booking volumes running significantly ahead of the company's higher capacity growth and net revenue yields expected to exceed last year's record levels (in constant currency). CCL remains committed to driving demand in excess of measured capacity growth to carry momentum into 2019 and beyond.
In terms of specifics, CCL expects full year 2019 constant currency net cruise revenue to be up approximately 5.5%, with capacity growth of 4.6%, and net revenue yields in constant currency are expected to be up approximately 1.0%. Changes in fuel prices and currency exchange rates are expected to increase earnings by $0.14 relative to 2018.
In sum, the NovQ results were quite good and the commentary about how advance bookings for 2019 are considerably ahead of the prior year was nice to hear. However, the FebQ EPS guidance seems to be the main reason why the stock is down today. CCL does tend to be somewhat cautious with guidance, so investors should take that into account. However, it seems higher fuel costs and FX will create some headwinds in FebQ. The stock has been trending lower in recent weeks but today sharpens those losses, now moving to two-year lows.
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