Carnival 3Q profit dips, but beats forecasts

Cruise operator Carnival's 3rd-quarter profit dips 3 percent, but beats analysts' forecasts

NEW YORK (AP) -- Carnival Corp., the world's largest cruise operator, beat analysts' third-quarter profit expectations and raised its 2008 guidance, although signs of weakness in advance bookings worried some analysts and investors. 
 
Carnival's quarterly profit dipped 3 percent, a smaller decline than Wall Street anticipated, due to lower-than-expected cruise costs and an insurance gain related to Hurricane Wilma in 2005. Net income for the quarter ended Aug. 31 fell to $1.33 billion, or $1.65 per share, from $1.38 billion, or $1.67 per share, a year ago as higher fuel prices cost the Miami-based company 28 cents per share.

Revenue gained 11 percent to $4.81 billion from $4.32 billion a year earlier, as North American brands were helped by strong demand for Caribbean cruises.

Analysts surveyed by Thomson Reuters had forecast earnings of $1.58 per share on slightly higher revenue of $4.84 billion.

In a statement, Carnival Chairman and Chief Executive Micky Arison said that for the rest of 2008 and the first half of 2009, occupancy levels for advance bookings are running slightly behind last year's, although they remain ahead of those in 2006 and ticket prices are higher.

"Although bookings have slowed compared to the strong booking levels of a year ago, pricing is holding up well given the current difficult economic environment," he said.

On a conference call with investors, Chief Operating Officer Howard Frank said the company is "trying to hold onto as much pricing as we can going into 2009."

Citi Investment Research analyst Joshua Attie, who affirmed a "Hold" rating on shares, said it may become more difficult for Carnival to keep raising prices if bookings continue to slow. Stifel Nicolaus & Co. analyst Steven Wieczynski, however, said he believes management is being "overly cautious" and maintained a "Buy" rating on the stock. He noted, however, that overcapacity may weigh on results in the first half of next year.

Carnival executives indicated they do not plan to eliminate the fuel surcharges they have added to passengers' tabs, despite a recent drop in fuel prices. Frank noted that the charges only recover a portion of Carnival's added fuel expenses, which are expected to total $678 million, or 83 cents per share, this year.

The executives also noted that a strengthening U.S. dollar will reduce profits at the company's European operations.

Net revenue yield, a key profitability gauge, gained 4.1 percent in the quarter, or 1.3 percent on a constant dollar basis. Net yield represents the amount the company made from its passengers per day after subtracting expenses.

In one sign that squeezed consumers are cutting back on overall vacation spending, Carnival noted that onboard revenue were lower than estimated across most of the company's brands in North America and in Europe.

Buoyed by the recent drop in fuel prices, Carnival raised its outlook for 2008 earnings per share to a range of $2.79 to $2.81, compared with its previous forecast of $2.70 to $2.80. The new guidance is well above analysts' average estimate of $2.75.

The company predicts fourth-quarter earnings per share will range from 36 cents to 38 cents, down from 44 cents in the prior year period. Analysts expect profit will total 37 cents per share.

Carnival shares dropped more than 4 percent earlier in the session, but finished the session with a gain of 30 cents at $39.23. The stock has ranged between $29.22 and $52.10 during the past 52 weeks.