Carnival Corporation‘s (CCL) second-quarter 2010 earnings came in at 32 cents per share, ahead of the Zacks Consensus Estimate at 30 cents. Earnings for the quarter exceeded management’s guidance of 26 to 30 cents. The improvement in results was aided by better-than-expected net revenue yields, coupled with an increase in capacity and ongoing cost reduction initiatives, which more than offset a substantial hike in fuel prices.

Rising fuel prices has been a cause of concern for Carnival Corporation, which adversely affected the quarterly earnings by 20 cents.

Total revenue spiked by 10.3% from the prior-year period to $3.2 billion. Net revenue yield at current dollar increased 2.4% from the prior-year quarter, largely attributable to a favorable foreign exchange rate. On a constant currency basis, net revenue yield rose 2.0% from the prior-year quarter, versus Carnival Corporation’s guidance of up 1% to 2%. Gross revenue yields increased just 0.4% in current dollars, driven by lower air transportation revenues.

Net cruise costs, including fuel, climbed 4.2% from the year-ago level on a constant dollar basis. Fuel price of $498 per metric ton was up 64% year over year and was a considerable decrease from Carnival Corporation’s guidance of $511 metric ton.

Net income for the quarter totaled $252.0 million, down from $264 million or 33 cents in the prior-year period. Carnival Corporation’s revenue growth had no material impact on the net income, given that fuel costs more than doubled on a year-over-year basis.

Segment Revenues:

Passenger Tickets: Revenues from Passenger Tickets increased to $2,427 million from $2,242 million in the second quarter of 2009.

Onboard and Other: Revenues from Onboard and Other jumped to $737 million from $673 million in the prior-year quarter.

Other: Revenues from the Other segment declined to $31 million from $33 million in the year-ago quarter.

Two new ships, P&O Cruises’ 3,100-passenger Azura and The Yachts of Seabourn’s 450-passenger Seabourn Sojourn, were delivered to Carnival Corporation during the reported quarter.

Third Quarter 2010 Guidance

 

  • Net revenue yields are expected to remain in the range of flat to up 1% (5–6% on a constant dollar basis). Net cruise costs − excluding fuel – are expected to be up 1 to 2%, compared with the prior year on a constant dollar basis.

     

  • Based on current fuel prices and currency exchange rates, Carnival Corporation expects earnings for the third quarter of 2010 to be in the range of $1.43 to $1.47 per share.

In the third quarter of 2010, two new ships will be launched in Europe: Holland America Line’s 2,106-passenger Nieuw Amsterdam and Cunard Line’s 2,092-passenger Queen Elizabeth. This will expand Carnival Corporation’s global foot print.

Full Year 2010 Guidance

 

  • Carnival Corporation reiterated its net revenue yields guidance of up 2% to 3% on a constant dollar basis. However, net revenue yields on a current dollar basis are expected to remain flat, due to the unfavorable changes in exchange rate.

     

  • Net cruise costs per available lower berth date, excluding fuel, are projected to be down 2.5% to 3.5% on a constant dollar basis.

     

  • Fuel expenses for 2010 are expected to increase by $440.0 on a year-over-year basis, costing another 55 cents per share.

     

  • Carnival Corporation maintained its earnings expectation for full year 2010 at $2.25 to $2.35.

 

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