|Carnival Corporation's large global fleet and strong consumer demand has propelled the company to higher annual net income in 2015. // Photo of Holland America Veendam by Susan J. Young|
Carnival Corporation is on a roll -- with much higher financial results this year than last. The world's largest cruise company announced adjusted net income for the full year 2015 of $2.1 billion, or $2.70 diluted earnings per share (EPS), compared to $1.5 billion, or $1.93 diluted EPS for the prior year.
|Arnold Donald, president and CEO, Carnival Corporation // Photo by Carnival Corporation|
“We nearly doubled our fourth quarter results and ended the year with 40 percent higher earnings," said Arnold Donald, Carnival Corp.'s president and CEO. "Strong operational execution delivered $.25 per share higher earnings than the mid-point of our full year 2015 December guidance, despite a $.10 drag from the net impact of currency and fuel prices."
Revenues for the full year 2015 were $15.7 billion compared to $15.9 billion for the prior year. Carnival Corp. attributed that to the unfavorable impact from currency exchange rates of more than $800 million.
Higher Onboard Revenues
"This year we achieved a 4.3 percent improvement (constant currency) in revenue yields compared to the prior year due to higher onboard revenues and increased ticket prices as we have driven demand in excess of capacity growth, while our ongoing efforts to leverage our industry-leading scale helped to contain costs," Arnold added.
When it comes to cash flow, the company is in great shape. "Our strong performance led to record operating cash flow of well over $4 billion versus $3.4 billion last year,” Donald stated.
Key metrics for the fourth quarter 2015 compared to the prior year were as follows:
- Net revenue yields (net revenue per available lower berth day or “ALBD”) increased 4.1 percent in constant currency, which was better than the company’s September guidance, up 3 percent. Gross revenue yields decreased 2.5 percent in current dollars due to changes in currency exchange rates.
- Net cruise costs excluding fuel per ALBD increased 3.2 percent in constant currency, which was in line with September guidance, up 3 percent. Gross cruise costs including fuel per ALBD decreased 10.7 percent in current dollars.
- Fuel prices declined 46 percent to $316 per metric ton for 4Q 2015 from $584 per metric ton in 4Q 2014 and were better than September guidance of $366 per metric ton.
- Changes in currency exchange rates reduced earnings by $0.08 per share.
- Adjusted net income was $389 million, or $0.50 diluted EPS, before U.S. GAAP unrealized losses (non-cash) on fuel derivatives of $117 million, or $0.15 diluted EPS. U.S. GAAP net income was $270 million, or $0.35 diluted EPS.
- The company repurchased approximately 8 million shares under its $1 billion stock repurchase program.
|Colorful atrium of a Carnival Cruise Line ship // Photo by Susan J. Young|
Highlights during the fourth quarter included the opening of Amber Cove, a new Carnival Corporation cruise facility on the northern coast of the Dominican Republic, and the launch of P&O Cruises Australia’s Pacific Aria and Pacific Eden, catering to Australian guests.
In addition, Carnival Cruise Line and AIDA Cruises said in October that they plan to enter the China sourcing market in 2017 with a second Carnival Cruise Line ship to be positioned there in 2018.
In 2016, six ships from the Costa Cruises and Princess Cruises brands are slated to operate in China. Princess will also introduce the new Majestic Princess to the Chinese market in 2017; it's the first Carnival Corp. vessel built specifically for Chinese guests, incorporating a unique blend of international and Chinese features.
Carnival Corporation also recently announced the formation of a joint venture with the China State Shipbuilding Corporation and the China Investment Corporation aimed at accelerating the development and growth of the overall cruise industry in China; the partners plan to launch a multi-ship domestic cruise brand in the Chinese market.
In its earnings report, the company said, "These latest developments further strengthen the company’s leading position in China, which is expected to, over time, surpass North America as the world’s largest cruising region."
So what's the outlook for bookings? Carnival Corporation said that, at this time, cumulative advance bookings for the first three quarters of 2016 are well ahead of the prior year at slightly higher constant currency prices. Since September, booking volumes for the first three quarters of 2016 are in line with last year’s levels at higher prices.
“As we had anticipated, with less inventory remaining for sale, we have begun to sell at higher prices than the same time last year, particularly close to departure, affirming our expectation of continued yield improvement in 2016," said Donald. "Based on current booking trends, the company forecasts full year 2016 net revenue yields in constant currency to be up approximately 3 percent compared to the prior year, of which approximately 1 percent is due to an accounting reclassification for the Europe, Australia and Asia segment."
The company forecasts full year 2016 adjusted earnings per share to be in the range of $3.10 to $3.40, compared to 2015 adjusted earnings of $2.70 per share.
The company expects adjusted earnings for the first quarter 2016 to be in the range of $.28 to $.32 per share, compared to 2015 adjusted earnings of $.20 per share.
Looking forward, Donald said: “We have accelerated progress toward and remain well positioned to achieve our double digit return on invested capital threshold in the next two to three years. Over time, we expect to continue to return excess cash to shareholders as demonstrated by our recent 20 percent increase in quarterly dividends and more than $400 million in share repurchases.”
Donald also noted that four new ships are scheduled to enter service for Carnival Corporation brands in 2016. Holland America Line’s Koningsdam and AIDAprima will debut in April, Carnival Vista will enter service in May, and Seabourn Encore in December.