Carnival shoots past Q2 profit forecasts but fuel, currency eat into

Adjusted net income was $489m, or 68 cents per share, higher than Wall Street's 59-cent forecast and the company's guidance of 56 cents to 60 cents, as well as Q2 2017's 52 cents. US GAAP profit was $561m, or 78 cents per share, well above the $379m, or 52 cents per share, a year ago.

Adjusted net income excludes unrealized gains and losses on fuel derivatives and other net charges, totaling $72m in net gains for the recent quarter and $1m in net gains for Q2 2017.

Revenues rose to $4.4bn

Revenues climbed to $4.4bn, up from $3.9bn in the prior year.

'Strong operational execution drove a 30% increase in adjusted earnings, affirming the strength of our core strategy to create demand that outpaces measured capacity growth through outstanding guest experience efforts coupled with innovative actions to increase consideration for cruising across all global markets,' said Arnold Donald, president and CEO, Carnival Corp. & plc.

Net yields higher than forecast, costs lower

Net revenue yields increased 4.8% in constant currency, exceeding March guidance of up 2.5% to 3.5%. Net cruise costs excluding fuel per available lower berth day increased 3.6%, better than guidance of up 4% to 5%, principally due to the timing of expenses between quarters.

At this time, cumulative advance bookings for the next three quarters are in line with the prior year at higher prices. Since March, booking volumes for the next three quarters have been running slightly ahead of prior year at prices that are in line with the prior year.

Donald added: 'Strong operational results coupled with sustained strength in booking trends have mitigated the unfavorable 19 cents per share impact of fuel and currency moving against us since our last update. We remain on track to deliver double-digit return on invested capital in 2018.'

Full-year EPS guidance goes to $4.15 to $4.25

Based on current booking trends, the company now expects full year 2018 net yields in constant currency to be up approximately 3% compared to the prior year, better than March guidance of up approximately 2.5%. The company still expects full year net cruise costs excluding fuel per ALBD to be up approximately 1% in constant currency, in line with earlier guidance. Changes in fuel prices and currency exchange rates are expected to decrease earnings by 19 cents per share compared to March guidance and 13 cents per share compared to the prior year.

As a result, Carnival now expects full year 2018 adjusted EPS in the range of $4.15 to $4.25, compared to the March forecast of $4.20 to $4.40, and 2017 adjusted EPS of $3.82.

Third quarter EPS guidance is $2.25 to $2.29

Third quarter constant currency net yields are expected to be up approximately 1.5% to 2.5% year over year, while net cruise costs excluding fuel per ALBD in constant currency for are expected to increase by approximately 3% to 4%. Changes in fuel prices and currency exchange rates are expected to decrease earnings by 6 cents per share compared to the prior year.

Q3 adjusted EPS is forecast in the range of $2.25 to $2.29, versus 2017 adjusted EPS of $2.29. Wall Street had been projecting $2.48.

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