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Carnival beats Q1 forecasts, raises outlook as strong wave drives higher cruise pricing

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Carnival Corp. & plc's adjusted earnings per share of 52 cents in the first quarter beat Wall Street's expection by 9 cents, and the company raised its 2018 profit forecast on strong demand that's fueling higher pricing.

First quarter adjusted net income was $375m, up from $279m, or 38 cents per share, a year ago, while US GAAP net income was $391m, or 54 cents EPS, up from $352m, or 48 cents a year ago.

Adjusted net income excludes unrealized gains and losses on fuel derivatives and other net charges, totaling $16m in net gains for Q1 2018 and $73m in net gains for Q1 2017. Revenues for the recent quarter reached $4.2bn, up from $3.8bn a year ago.

'We are off to a strong start to the year, achieving another quarter of record earnings on record revenues and exceeding the high end of guidance. This strong operational execution affirms our efforts to create demand in excess of measured capacity growth and exceed guest expectations once on board,' Carnival Corp. & plc president and CEO Arnold Donald said.

He credited the company's guest experience efforts, coupled with ongoing marketing and public relations programs, for 'accelerating cruise demand across the board to drive cruise ticket prices higher.'

Q1 net revenue yields increased 3.9%, better than December guidance of up 1.5% to 2.5%. Net cruise costs excluding fuel per available lower berth day increased 1%, better than December guidance of up 2% to 3%, mainly due to the timing of expenses between quarters. Changes in fuel prices (including realized fuel derivatives) cut earnings by 4 cents per share, offset by a 4-cent boost from currency exchange rates.

Carnival said cumulative advance bookings for the remainder of 2018 are currently in line with the prior year at higher prices. Since January, booking volumes for all future periods have been running ahead of the prior year at higher prices.

'The booking strength achieved during this year's wave season, outpacing even last year's record levels, demonstrates sustained strong demand for our world's leading cruise brands and delivers further confidence in our raised earnings guidance,' Donald said. 'We remain on track to achieve double-digit return on invested capital while continuing to return cash to shareholders through ongoing share repurchases and dividend growth.'

Based on current booking trends, Carnival expects full year 2018 net revenue yields in constant currency to be up approximately 2.5% compared to the prior year, in line with December guidance. The company expects full year net cruise costs excluding fuel per ALBD in constant currency compared to the prior year to be up approximately 1%, also in line with December guidance. Changes in fuel prices and currency exchange rates are expected to increase earnings by 10 cents per share compared to December guidance.

As a result, full year 2018 adjusted earnings per share are forecast in the range of $4.20 to $4.40, compared to December guidance of $4 to $4.30 and 2017 adjusted EPS of $3.82.

Second quarter constant currency net revenue yields are expected to be up approximately 2.5% to 3.5% compared to the prior year, while net cruise costs excluding fuel per ALBD in constant currency are projected to increase by approximately 4% to 5%.

That puts Carnival's Q2 EPS guidance in the range of 56 cents to 60 cents, versus 2017 adjusted EPS of 52 cents and the consensus forecast of 53 cents.

The company has invested more than $250m in share repurchases since the beginning of the quarter, bringing the cumulative total of repurchases to date to over $3.4bn since late 2015.