Carnival Corp. CCL reported mixed fiscal fourth-quarter and full-year 2015 results, wherein earnings beat the Zacks Consensus Estimate, but revenues missed the same by a narrow margin.
The Miami-based cruise company’s adjusted earnings per share of 50 cents surpassed the Zacks Consensus Estimate of 41 cents by 22%, as well as management’s guidance range of 36 cents to 40 cents. Further, quarterly earnings surged 85.2% year over year.
Higher-than-expected revenue yields drove the substantial rise in earnings.
Quarterly earnings excluded net unrealized losses on fuel derivatives.
Total revenue declined 0.2% year over year to $3.711 billion due to lower passenger ticket revenues. Revenues also missed the Zacks Consensus Estimate of $3.718 billion by 0.2%.
Net revenue yields (in constant currency) increased 4.1% year over year, better than the September guidance of 3% rise. Gross revenue yields, however, decreased 2.5% due to fluctuation in currency exchange rates.
Segment Revenues
Carnival earns revenues from its Passenger Tickets business, Onboard and Other as well as Tour and Other segments.
Passenger Tickets: Passenger Tickets revenues declined 1.3% year over year to $2.71 billion.
Onboard and Other: Onboard and Other revenues were $969 million, up 3% year over year.
Tour and Other: Revenues increased 3.1% from the year-ago period to $33 million.
Income & Expenses
Operating income came in at $510 million, a 92.5% year-over-year surge, driven by lower operating costs.
Net cruise costs (in constant dollar) per available lower berth day (ALBD) (fuel and impairments excluded) increased 3.2%. The rise was within the guidance of 3% growth. Gross cruise costs, including fuel per ALBD in current dollars, decreased 10.7%.
Fuel price was $316 per metric ton, down 46% year over year, while fuel consumption increased 1%.
Fiscal First-Quarter 2016 Guidance
Fiscal-quarter net revenue yields in constant dollar are expected to increase 3.5–4.5% from the prior year. Net cruise costs, excluding fuel per ALBD, are expected to grow 2.5–3.5% year over year on a constant dollar basis.
Based on the above factors, the company expects adjusted earnings per share within 28 cents to 32 cents.
Fiscal 2016 Guidance
Carnival expects fiscal 2016 adjusted earnings per share in the range of $3.10 to $3.40, compared with $2.70 in fiscal 2015.
Based on current booking trends, the company expects full-year 2016 net revenue yields in constant currency to be up approximately 3% from the prior-year level. An accounting reclassification for the Europe, Australia and Asia segment is likely to contribute about 1% to the improvement.
The company expects net cruise costs excluding fuel per ALBD, on a constant currency basis, for full year 2016 to be up roughly 2%. The reclassification is likely to account for nearly 1.5%.
Full-Year Fiscal 2015 Earnings
For 2015, earnings were $2.70 per share, up 39.9% year over year. Further, earnings per share exceeded the guidance range of $2.56 to $2.60.
Revenues were $15.71 billion, down 1.1% year over year.
Our Take
Carnival is well positioned as the global leader in a cruise industry with solid growth prospects. The company’s brand-building efforts and other promotional activities are expected to boost bookings further. Meanwhile, its strategy to tap into the fast growing Asian market requires special mention.
However, higher operating costs associated with investments in technology and advertising remain a major headwind for the Zacks Rank #3 (Hold) company. Further, the strong dollar would continue to hurt near-term revenues.
Some stocks in the leisure and recreational industry that can be considered are International Speedway Corp. ISCA, The Madison Square Garden Co. MSG and Royal Caribbean Cruises Ltd. RCL. All these stocks carry a Zacks Rank #2 (Buy).
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