This weeks launch of the 130,000 gt Carnival Breeze at Fincantieri’s Monfalcone, Italy, shipyard featured a traditional coin placing ceremony. But lately Carnival Corporation has been sending less coin the way of shipbuilders in the shape of newbuilding orders. Instead, it has been buying back its own shares.
The company recently repurchased 14.5 million shares of Carnival Corporation & plc stock at a total investment of $445 million. “The current share repurchase program demonstrates our confidence in the earnings power of our global cruise brands. Reduced capital commitments due to the slower pace of our shipbuilding program, along with our strong balance sheet and solid investment grade credit ratings, leave us well positioned to opportunistically return cash to shareholders,” said Chairman and CEO Micky Arison,
The cruise ship giant reported net income of $1.3 billion, or $1.69 diluted EPS, on revenues of $5.1 billion for its third quarter ended August 31, 2011. Net income for the third quarter of 2010 was $1.3 billion, or $1.62 diluted EPS, on revenues of $4.5 billion.
Mr. Arison said that earnings were better than anticipated in the company’s June guidance due to the combination of higher than expected revenue yields and lower than expected costs in the third quarter.
“Cruise ticket prices for our peak summer season remained strong close to sailing driving a 2.6 percent yield improvement (constant dollars,” said Mr. Arison, “Our North American brands performed well, achieving an almost six percent yield increase, while our European, Australian and Asian brand yields fell two percent (constant dollars) due primarily to the geo-political unrest in the Middle East and North Africa. Higher revenue yields helped offset a 45 percent increase in fuel prices, leading to improved quarterly profits.”
Key metrics for the third quarter 2011 compared to the prior year were as follows:
- Third quarter results included a charge of $0.02 per share related to the sale of Costa Marina, which was not anticipated in the company’s June guidance.
- On a constant dollar basis net revenue yields (net revenue per available lower berth day-“ALBD”) increased 2.6 percent for 3Q 2011, which was better than the company’s June guidance, up 1.0 to 2.0 percent. Net revenue yields in current dollars increased 7.2 percent due, in part, to favorable currency exchange rates. Gross revenue yields increased 6.8 percent in current dollars.
- Net cruise costs excluding the Costa Marina charge and fuel per ALBD increased 1.9 percent in constant dollars, and was better than June guidance, up 2.5 to 3.5 percent, partly due to the timing of expenses. Gross cruise costs including fuel per ALBD in current dollars increased 11.7 percent.
- Fuel prices increased 45 percent to $686 per metric ton for 3Q 2011 from $473 per metric ton in 3Q 2010 and was higher than June guidance of $670 per metric ton.
The company says that cumulative advance bookings for the remainder of 2011 and the first half of 2012 are currently at higher prices with slightly lower occupancies compared to the prior year. Since June, booking volumes for the remainder of the year and the first half of 2012 have run ahead of the prior year at slightly higher prices.
Mr. Arison noted, “Despite the uncertain economic environment, we have a strong base of business for the first half of 2012, and booking trends during the third quarter have been solid. The increased level of importance consumers are placing on value continues to drive demand for our cruise products.”
The company continues to expect full year net revenue yields, on a constant dollar basis, to increase 2.0 percent, in line with its June guidance, up 1.5 to 2.5 percent. Net revenue yields on a current dollar basis are expected to increase 4.0 percent for the full year 2011 compared to 2010.
The company expects net cruise costs excluding fuel per ALBD for the full year 2011 to be up 1.0 percent on a constant dollar basis, at the higher end of its June guidance range, flat to up 1.0 percent, primarily due to the charge related to the sale of Costa Marina.
In addition, changes in fuel prices and currency exchange rates are expected to reduce full year 2011 earnings by $0.06 per share compared to the company’s June guidance. Based on the current spot prices for fuel, fuel costs for the full year 2011 are now expected to increase $542 million compared to 2010, costing an additional $0.69 per share.
Taking all the above factors into consideration, the company now forecasts full year 2011 fully diluted earnings per share to be in the range of $2.40 to $2.44, compared to 2010 earnings of $2.47 per share.
Fourth quarter constant dollar net revenue yields are expected to increase 1.0 to 2.0 percent (up 1.5 to 2.5 percent on a current dollar basis) compared to the prior year. Net cruise costs excluding fuel per ALBD for the fourth quarter are expected to be down 3.0 to 4.0 percent on a constant dollar basis (down 2.5 to 3.5 percent on a current dollar basis) compared to prior year.
Fuel costs for the fourth quarter are expected to increase $171 million compared to the prior year, costing an additional $0.22 per share.
Based on the above factors and using current fuel prices and currency exchange rates, the company expects fully diluted earnings for the fourth quarter 2011 to be in the range of $0.26 to $0.30 per share, compared to $0.31 per share in 2010.
September 20, 2011