Carnival Corporation’s (CCL) third quarter earnings came in at $1.33 per share, ahead of the Zacks Consensus Estimate of $1.18 per share. The results were positively affected by better-than-expected pricing on close-in bookings.

Total revenue decreased 14% from the prior-year period to $4.1 billion. Net revenue yield decreased 16.5% from the prior-year quarter. On a constant currency basis, net revenue yield decreased 12.3% from the prior-year quarter. Net cruise costs per available lower berth day (ALBD) decreased 14.8% from the prior-year quarter, due to declining fuel prices and ongoing cost control. Fuel price of $405 per metric ton was down 39.0% year-over-year and was in line with the company’s guidance.

Net income for the quarter was $1.1 billion, compared to a net income of $1.3 billion in the prior-year period. Earnings for the quarter came in at the higher range of the management’s guidance ($1.15–1.19 per share), driven primarily by lower-than-expected net cruise costs, as well as stronger-than-expected pricing on close-in bookings. We note, however, that pricing was still down year-over-year, as the company seeks to boost occupancy during the economic recession.

Guidance for Fourth Quarter 2009

  • Net revenue yields are expected to decline 9–11% (11–13% on a constant dollar basis). Net cruise costs (excluding fuel) for the fourth quarter are expected to be down slightly compared to the prior-year quarter on a constant dollar basis.
  • Based on current fuel prices and currency exchange rates, the company expects earnings for the fourth quarter of 2009 to be in the range of 16–20 cents per share, down from 47 cents per share in 2008.

Guidance for Fiscal Year 2009  

  • Net revenue yields are expected to decline 14% (10% on a constant dollar basis)
  • Fuel expenses for 2009 are now expected to be approximately 5 cents higher per share than forecasted in the company’s previous guidance.
  • Management has increased its earnings expectation for full year 2009 to $2.16–$2.20 from $2.00–$2.10 previously.

Though 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. That said, the results do point to some resiliency in the midst of the recession, and we maintain our Neutral recommendation at this time.

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