Carnival Posts Lower Net Income, Higher Revenues for Q2 of 2017

Carnival Vista Havana Staterooms and Suites Editorial Use Only Copyright Susan J. Young
The atrium of Carnival Vista, a Carnival Cruise Line vessel; it's one of 103 ships of 10 brands owned by Carnival Corporation.

Carnival Corporation reported second quarter 2017 net income of $379 million, compared with $605 million for the same period a year ago. Revenues for the second quarter of 2017 were $3.9 billion, higher than the previous year's second quarter revenues of $3.7 billion. 

However, second quarter 2017 adjusted net income of $378 million was higher than adjusted net income of $370 million, for the second quarter of 2016.

Adjusted net income excludes unrealized gains/(losses) on fuel derivatives and other net charges, which totaled gains of $1 million for the second quarter 2017 and $235 million for the second quarter 2016

“Strong execution drove significant operational improvements, which more than offset the substantial drag from fuel and currency, leading to another second quarter adjusted earnings record," said Arnold Donald, president and CEO, Carnival Corporation. "It was reinforcing to see over five percent improvement in cruise ticket prices, affirming our efforts to increase demand by building positive word of mouth through the delivery of exceptional guest experiences as well as our innovative marketing and public relations programs.”

Key information for the second quarter 2017 compared to the prior year:

  • Gross revenue yields (revenue per available lower berth day or “ALBD”) increased 2.7 percent. In constant currency, net revenue yields increased 5.1 percent for 2Q 2017, better than March guidance of up 2.5 to 3.5 percent. 
  • Gross cruise costs including fuel per ALBD increased 3.2 percent. In constant currency, net cruise costs excluding fuel per ALBD increased 1.5 percent, in line with March guidance of up 1.5 to 2.5 percent. 
  • Changes in fuel prices (including realized fuel derivatives) and currency exchange rates decreased earnings by $0.12 per share.

Highlights from the second quarter 2017 include the delivery of Princess Cruises’ Majestic Princess, the first ship tailored for the China market, as well as the addition of AIDAperla to the company's German brand, AIDA Cruises.

Also during the quarter, two additional Princess Cruises ships, Caribbean Princess and Royal Princess, were outfitted with the technical requirements to transition them in early 2018 to the Ocean Platform featuring Ocean Medallion. That interactive guest experience technology will debut on Regal Princess this November.

Earnings Outlook

Cumulative bookings for the next three quarters are higher and at prices well ahead of the prior year. During the quarter, booking volumes for the next three quarters have been running in line with last year, also at prices that are well ahead.

Looking forward, Donald commented, “We are realizing sustained strength in booking trends across all core products. We are delivering on our strategy to grow demand in excess of measured capacity growth while leveraging our industry-leading scale resulting in increased return on invested capital. We are working hard to sustain the momentum."

He also said the company had accelerated returns to shareholders through its recent dividend increase, with annual dividend distributions now approaching $1.2 billion, and the re-authorization of up to $1 billion in share repurchases. Donald added that the company has completed $2.7 billion in share repurchases since late 2015.

The company expects full year 2017 net revenue yields to increase approximately 3.5 percent compared to the prior year. That's better than March guidance of up approximately 3 percent.

The company expects full year net cruise costs excluding fuel per ALBD in constant currency to be up approximately 1.5 percent. That compares to the March guidance of an approximately 1 percent increase.

Changes in fuel prices (including realized fuel derivatives) and currency exchange rates compared to the prior year are expected to decrease earnings by $.35 per share.

Taking the above factors into consideration, the company expects full year 2017 adjusted earnings per share to be in the range of $3.60 to $3.70, which compares to the March guidance of $3.50 to $3.70 and 2016 adjusted earnings per share of $3.45.

Third Quarter 2017 Outlook

Third quarter constant currency net revenue yields are expected to be up approximately 4 percent compared to the prior year.

Net cruise costs excluding fuel per ALBD in constant currency for the third quarter of 2017 are expected to be in line with the prior year.

Changes in fuel prices (including realized fuel derivatives) and currency exchange rates compared to the prior year are expected to decrease earnings by $0.05 per share.

Based on the above factors, the company expects adjusted earnings per share for the third quarter 2017 to be in the range of $2.16 to $2.20 versus 2016 adjusted earnings per share of $1.92.

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