NEW YORK — Carnival Corp. reported a better-than-expected second-quarter profit Thursday, as the cruise operator continued to cut costs and began to lift prices from bargain-basement levels.
NEW YORK — Carnival Corp. reported a better-than-expected second-quarter profit Thursday, as the cruise operator continued to cut costs and began to lift prices from bargain-basement levels. Carnival shares jumped $2.26 cents, or 9.8 percent, to $25.31 in morning trading on those results. The stock has traded between $14.85 and $42.39 during the past 52 weeks. Increasing fuel prices, however, are weighing on Carnival’s bottom line, and the company lowered its full-year forecast to reflect that rising expense. Carnival was forced to slash its prices deeply to fill ships after a sharp drop in vacation spending in late 2008 and early this year. Carnival reported that those deep discounts have driven a surge in bookings. As a result, Chairman and CEO Micky Arison said the company began "tweaking prices" higher in March. Swine flu also cost Carnival in the second quarter. The company began redirecting ships away from Mexican ports in late April as swine flu deaths peaked in that region and fear spread that tourists could pick up the illness. Carnival said it is resuming stops in Mexico this month. "The key takeaway from the quarter is that fundamental business conditions — the demand for cruise vacations at reasonable prices — has gotten better," wrote Robert LaFleur of Susquehanna Financial Group in a note to investors. "While we don’t like to see earnings expectations move south, we are encouraged that the only reason they are doing so is for exogenous factors like the swine flu and higher oil prices." Miami-based Carnival recorded a 32 percent drop in profit to $264 million, or 33 cents per share, in the quarter that ended May 31. That’s down from $390 million, or 49 cents per share, a year ago. Revenue tumbled 13 percent to $2.95 billion. Analysts polled by Thomson Reuters expected a profit of 29 cents per share on revenue of $2.99 billion. Arison attributed the company’s performance to lower-than-anticipated cruise costs and gains in pricing. Rising fuel costs, however, partly offset those improvements. Fuel prices, while still lower than last year’s historic levels, has risen higher than analysts anticipated, driven in part by improving confidence in the economy. The company said it started some conservation programs that helped reduce fuel consumption during the period. That includes route changes and upgrades to ships — like new technology and silicon-painted hulls — that improve fuel efficiency. Also, the impact of swine flu lowered earnings by about 3 cents per share during the second-quarter. Carnival expects to take an additional 7-cent charge in the third quarter for a total of 10 cents per share this fiscal year. For the second half of 2009, Carnival said its booking levels remain slightly behind last year, although booking volumes have picked up significantly. Ticket prices, while improving, remain at "substantially lower levels." "As we have progressed throughout the year, booking volumes have continued to accelerate with less discounting, as consumers have come to recognize the extraordinary value proposition our cruise vacations represent," Arison said. "Overall by the time the quarter closes, we expect fourth-quarter pricing to be lower year-over-year, but improving on the third-quarter’s expected price declines," said Vice Chairman and Chief Operating Officer Howard Frank said during the call. Carnival lowered its 2009 earnings forecast to a range of $2 to $2.10 per share, from its previous guidance range of $2.10 to $2.30. Analysts predict a 2009 profit of $2.08 per share. UBS Investment Research analyst Robin Farley noted that Carnival’s full-year earnings guidance is actually higher if the impact of fuel costs is excluded. For the third-quarter, Carnival expects earnings to range from $1.15 and $1.19 per share, compared with analysts’ forecast of $1.25 per share. ______ Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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