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Carnival shoots past Q2 profit expectations, lifts yield outlook on stronger demand

Carnival Corp. & plc's record second quarter profit of 49 cents per share beat Wall Street expectations by a dime, and the company narrowed its full-year guidance to a range of $3.25 to $3.35, from $3.20 to $3.40 previously. Analysts had been forecasting $3.39. Carnival edged up its projected net yield increase to 3.5% for the year, but Q3 guidance is lower than the consensus, on higher timing of advertising expense and drydock expense.

Amid all the financial uncertainty of Britain's vote to leave the European Union, the Carnival board on Monday approved the company's third $1bn share repurchase program.

Q2's net revenue yields rose 3.6% in constant currency, year over year, better than the company's guidance of up 1.5% to 2.5%.

'Our ongoing effort to drive demand for our brands in excess of our measured capacity growth has led to increased revenues and helped maintain the mid-point of our full year earnings guidance despite the recent currency movements and rises in fuel prices that combined represent a negative 17 cents per share,' said Arnold Donald, president and ceo of Carnival Corp. & plc.

Changes in fuel prices, including derivatives, and currency exchange rates contributed 4 cents per share to Q2 EPS.

The quarter's adjusted net income was $370m, up from $193m, or 25 cents per share, a year ago. The 49-cent profit beat both Wall Street's forecast of 39 cents and the company's guidance of 34 cents to 38 cents.

US GAAP net income, which included unrealized gains on fuel derivatives of $242m and $7m of other expenses, was $605m, 80 cents diluted EPS, compared to Q2 2015's $222m, or 29 cents EPS.

Revenues were $3.7bn, up from $3.6bn.

Carnival said cumulative advance bookings for the remainder of the year are well ahead of the prior year at slightly higher prices. Since March, bookings for the balance of 2016 are at higher prices with volumes running lower than last year because there is less inventory remaining for sale than at this time in 2015.

The company expects full year 2016 net revenue yields on a constant currency basis to be up approximately 3.5%, compared to March guidance of up approximately 3%.

For Q3, Carnival forecasts adjusted earnings in the range of $1.83 to $1.87, versus Q3 2015's $1.75. That is lower than the Street's forecast of $1.98.

The company said net cruise costs excluding fuel per available lower berth day will likely be 6% to 7% higher on a constant currency basis than a year ago, driven by the timing of advertising expense and the Queen Mary 2 drydock.