Shares of Carnival Corporation & plc (CCL, CUK) traded higher today following the company’s release of second-quarter results.
Although second-quarter results exceeded expectations, we have lowered our full-year estimates, partially due to increased fuel prices going forward.
While the quarterly results benefited from better-than-expected pricing on close-in bookings, we caution investors that this does not mean that pricing was strong. Rather, the pricing trends simply exceeded management’s low expectations. The company is still cutting prices, relative to last year, in an attempt to boost occupancy.
The shares have traded nearly 10% higher today by essentially delivering results that cleared an already lowered bar.
Further, the fact that management lowered its full-year earnings outlook, despite the better-than-expected second quarter results, highlights the significant and unpredictable impact of fuel prices on the company’s operations.
Even though Carnival has taken steps to reduce net cruise costs, the company’s financial results remain to some extent at the mercy of fluctuations in fuel prices and currency exchange rates.
That said, the results do point to some resiliency in the midst of the recession. The company’s ability to control expenses during the quarter was impressive, and the increased pace of second-half booking volumes is encouraging. We note, however, that the substantially lower ticket prices will likely put pressure on margins going forward.
As such, we maintain our Hold rating on shares of Carnival, as well as its peer Royal Caribbean (RCL), at this time.
Read the full analyst report on “CCL”
Read the full analyst report on “CUK”
Read the full analyst report on “RCL”
Zacks Investment Research
