Several temporary port closures associated with the recent hurricanes have led to voyage disruptions that are expected to result in an estimated 10-to-12 cent per share reduction in fourth quarter 2017 earnings, Arnold Donald, president and CEO, Carnival Corporation, said in the cruise company's third quarter earnings report.
“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," Donald said.
Many people throughout these areas have been impacted and several ports are temporarily unavailable, he noted. He also noted that the company had resumed normal operations with some itinerary modifications.
"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," he stressed.
That said, during fourth quarter 2017, the company expects a 1.5 percent increase in net cruise costs that are directly attributable to the impact of those recent weather-related voyage disruptions.
Advance Bookings Remain Strong
Putting the hurricane-related issues in perspective, though, Donald emphasized that Carnival Corporation's 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."
Most notably, he stressed: “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."
Carnival Corporation expects to earn 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," he said.
Third Quarter 2017 Results
Overall, the world's largest cruise company reports that third quarter 2017 U.S. GAAP net income, based on generally accepted accounting principles, was $1.3 billion, or $1.83 diluted earnings per share down from $1.4 billion and $1.93 for the same period a year ago.
Adjusted net income, though, was higher than the same quarter a year ago. Revenues for third quarter 2017 were $5.5 billion, higher than the $5.1 billion posted in the third quarter of 2016.
“We delivered another consecutive quarter of strong operational improvement and another third quarter adjusted earnings record," said Donald. "Our ongoing efforts to create demand well in excess of measured supply growth helped to drive five percent higher cruise ticket pricing."
Donald also cited the company's innovative efforts to accelerate demand in 2018 and beyond including Ocean View, its recently announced digital streaming channel, and PlayOcean, its new mobile gaming portfolio. Both products officially launch on September 28 at New York City event in Times Square between 11 a.m. and 1 p.m.
Carnival released these key statistics for third quarter 2017 compared to the prior year:
- Gross revenue yields increased 5.5 percent.
- Net revenue yields increased 5.1 percent for the third quarter, better than June guidance of up approximately 4 percent.
- Gross cruise costs including fuel increased 12.4 percent, while net cruise costs excluding fuel increased .2 percent, in line with June guidance.
Full Year Expectations
The company expects full year 2017 net revenue yields to be up approximately 4 percent compared to the prior year, better than June guidance of up approximately 3.5 percent.
Full year net cruise costs excluding fuel are expected to rise 2.5 percent compared with the company's June guidance of up approximately 1.5 percent.
The cumulative impact of the recent weather-related voyage disruptions reduced the previously forecasted full year net revenue yields by .4 percent and increased full year net cruise cost guidance by .3 percent.
Changes in fuel prices are expected to decrease earnings by $0.33 per share.
So, with those factors considered, full year 2017 adjusted earnings per share are expected to be in the range of $3.64 to $3.70 compared to June guidance of $3.60 to $3.70 and 2016 adjusted earnings per share of $3.45.
Fourth Quarter 2017 Outlook
Fourth quarter net revenue yields should be up 1.5 to 2.5 percent compared to the prior year. Had the weather related voyage disruptions not occurred, the cruise company said revenue yields would have risen 3.5 percent.
Net cruise costs excluding fuel for the fourth quarter of 2017 are expected to increase by 6 to 7 percent compared to the prior year.
Of that, the company said 1.5 percent is likely attributable to the impact of the recent weather-related voyage disruptions and nearly 3 percent will be due to higher dry-dock costs. Changes in fuel prices are also expected to decrease earnings by $.04 per share.
Thus, the company expects adjusted earnings per share for the fourth quarter 2017 to range from $.44 to $0.50 versus 2016 adjusted earnings per share of $.67.