UPDATE: Carnival 2Q Net Off 4.5% On Fuel Costs; 3Q View Weak

22nd Jun 2010 16:44

(Updates with comments from conference call, details on currency exchange, updated stock quote.) By Melissa Korn and Tess Stynes Of DOW JONES NEWSWIRES Carnival Corp.'s (CCL) fiscal second-quarter earnings fell 4.5%, weighed down by higher fuel costs, and the cruise-ship company warned fuel and currency expenses would damp earnings growth for the rest of the year. Still, Carnival noted net revenue yields turned positive for the first time since late 2008. Shares fell 2.1% in recent trading to $34.01 as Carnival projected third-quarter earnings of $1.43 to $1.47 a share, short of analysts' $1.52-per-share estimate, according to Thomson Reuters. Carnival, like other cruise line operators, had discounted its trips significantly during the recession to boost occupancy rates. Capitalizing on strong wave season bookings, the company announced in March it would raise prices by up to 5% and on Tuesday said the higher prices haven't scared off potential customers, as bookings remain strong. However, Carnival said fuel price fluctuations will continue to control earnings for the remainder of the year. "In the end, fuel is driving our costs up," Chief Financial Officer David Bernstein said on a conference call. The company expects third-quarter fuel costs to cut earnings by 9 cents a share and full-year costs to cut per-share earnings by a total 55 cents. Carnival noted that second-quarter fuel prices, though a 20 cent per-share damper, came in below the company's March forecast. Carnival, which runs 11 cruise lines including Princess Cruises, Holland America Line and Cunard Line, is also facing headwinds from currency fluctuations. More than one-third of the company's capacity comes from Europe, according to analysts at UBS. Carnival said exchange rates cut earnings by $97 million since its March guidance, though that was somewhat offset by cost cuts. If the dollar strengthens or weakens by 10% against other currencies, Bernstein said, per-share earnings would decrease or increase, respectively, by about 20 cents. For the full year, Carnival backed its per-share earnings forecast of $2.25 to $2.35 and revenue yield growth of 2% to 3% on a constant currency basis. Carnival said consumer demand remains strong, particularly in Europe, despite macroeconomic turmoil. "Considering recent global economic concerns and other world events, our advance bookings are holding up reasonably well and remain in line with our expectations," said Chairman and Chief Executive Micky Arison. "We believe this will lead to earnings growth in both the third and fourth quarters." For the fiscal second quarter ended May 31, Carnival posted earnings of $252 million, or 32 cents a share, down from $264 million, or 33 cents a share, a year earlier. The company in March forecast earnings of 26 cents to 30 cents, above analysts' views at the time. Fuel costs soared 64% to $498 per metric ton, cutting 20 cents a share from the bottom line. Carnival said the volcanic ash cloud covering much of Europe this spring and the Chilean earthquake combined to cut per-share earnings by another 2 cents. Revenue increased 8.4% to $3.2 billion, below analysts' most-recent estimate of $3.28 billion. Net revenue yields rose 2% excluding currency fluctuations, at the high end of the company's guidance. -By Melissa Korn and Tess Stynes, Dow Jones Newswires; 212-416-2271; [email protected] (END) Dow Jones Newswires June 22, 2010 11:44 ET (15:44 GMT)