Miami, Florida-based Carnival Corporation (CCL) expects its fiscal 2011 earnings outlook to be reduced by 15 cents arising from route changes of almost 300 itineraries since February and March due to political turmoil in the Middle East and North Africa and the lingering effects of the Japan earthquake.
Additionally, the company’s guidance will also be lowered by 5 cents driven by rising fuel prices. However, a benefit of 5 cents resulting from other cost areas is expected to offset the negative impact of 5 cents owing to soft UK and Southern Europe bookings.
Thus, fiscal 2011 EPS is now expected in the range of $2.35 to $2.45, compared with the previous guidance of $2.55 to $2.65 per share, reflecting a net impact of 20 cents and is lower than fiscal 2010 EPS of $2.47. Management’s original guidance for 2011 was $2.90 to $3.10.
Following the announcement of the company reducing its outlook, share prices fell 53 cents from the previous day's price and closed at $35.27 on Monday. The Zacks Consensus Estimate for 2011 is pegged at $2.58.
For the second quarter of 2011, the company expects EPS in the range of 20 cents to 24 cents per share. The Zacks Consensus Estimate for the second quarter is 22 cents, which is within the guidance range.
Carnival, the world’s biggest cruise-line operator, is experiencing strong demand in the North American market and anticipates sequential improvement in the second half of 2011. Carnival will report its second quarter 2011 earnings and provide updated full-year 2011 outlook on June 21.
We believe that the upcoming quarter is expected to be affected the most by the ongoing political unrest in the Middle-east and North Africa. Moreover, Carnival does not hedge its exposure to rising fuel costs, and more than half of its revenues comes from passengers outside the U.S. As a result, the company’s result will be more negatively impacted by fluctuation in fuel expenses and currency exchange rates.
One of Carnival’sprimary competitors, Royal Caribbean Cruises Ltd. (RCL), during its first quarter results also cut down its fiscal 2011 EPS estimate to $3.10 – $3.30 from the earlier projection of $3.25 to $3.45 due to geopolitical risks in North Africa and the earthquake in Japan.
We have a Zacks #3 Rank (short-term Hold rating) on the stock. We also reiterate our long-term Neutral recommendation.
CARNIVAL CORP (CCL): Free Stock Analysis Report
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