Post Earnings Coverage as Carnival Almost Triples Profit

LONDON, UK / ACCESSWIRE / June 29, 2016 / Active Wall ST announces its post-earnings coverage on Carnival Corp. (NYSE: CCL). On Tuesday, June 28, 2016, the company announced its Q2 fiscal 2016 financial results. The cruise-ship company’s earnings beat market expectations as it nearly tripled on the back of lower fuel costs. Furthermore, the company announced a $1 billion share repurchase program. Register with us now for your free membership and see our complete earnings coverage on this equity at:

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Earnings Reviewed

For the quarter ended on May 31, 2016, Carnival reported earnings of $605 million, or $0.80 per share, up from $222 million, or $0.29 per share, in the year ago period. Earnings, adjusted for non-recurring gains, rose to $0.49 in Q2 FY16 from $0.25 per share in Q2 FY15, surpassing analysts’ consensus estimate of $0.39 per share. Revenue for Q2 FY16 was $3.71 billion as compared to revenue of $3.59 billion in Q2 FY16, and came in above market estimates of $3.68 billion.

The company which operates around 100 ships around the globe has reaped the benefits from the collapse of fuel prices from above $100 per barrel to below $30 per barrel in the past two years. The company noted that changes in fuel prices and currency exchange rates contributed $0.04 per share to Q2 FY16 earnings. Excluding currency effects, net revenue yields (net revenue per available lower birth day) rose 3.6%, above the prior estimate for an increase of 1.5% to 2.5%. Excluding fuel expenses, net cruise costs declined 1.9% compared with forecast for an increase of between 0.5% and 1.5%.

Booking Advance but concerns from Brexit

Carnival said that advance reservations for the remainder of the calendar year 2016 were well ahead of the prior year at slightly higher prices, yet with lower volumes as there are fewer inventories available for sales as compared to last year. Advance customers booking should help to lower the impact of the current market volatility due to Britain’s decision to exit the European Union on June 24, 2016. The British pound, which represents 30% of Carnival’s currency exposure, reached a 31-year low after the referendum and can negatively impact earnings if it stays depressed.

Carnival eyes Chinese market

Carnival has also stated its desire to increase capacity in the lucrative Chinese market. The company plans to reduce European capacity by about 5% in favour of growing more in the burgeoning Chinese market. The leisure travel and cruise operator plans to increase capacity by more than 30% in 2017 compared to a 60% increase this year. China accounts for about 5% of the Carnival’s global capacity, and the company expects to increase this capacity to 6% by 2017.

Share Repurchase and Dividend

Carnival has authorized the buyback of $1 Billion worth of stock. Since October 2016, the company has already repurchased $1.9 Billion worth of shares, signalling their confidence moving forward.

The company also paid a quarterly dividend of $0.35 per share, which was paid on June 17, 2016 to shareholders of record on May 27, 2016. This represents a $1.40 annualized dividend and a yield of 3.21%. The quarterly dividend was higher than previous quarterly dividend of $0.30.

Guidance

For Q3 FY16, Carnival expects net revenue yields to be between 2% to 3%, and adjusted earnings to be in the range of $1.83 to $1.87, from the prior guidance of $1.83 to $1.87 per share. For the fiscal year ending in November, 2016, the company expects adjusted earnings to be in the range of $3.25 to $3.35 on a 3.5% increase in net revenue yields from the prior guidance of $3.20 to $3.40 per share.

Stock Performance

Carnival’s share gained 0.21% closing at $43.73. The stock hit an intraday high of $46.16, post its earnings release. Volume for the day was 14.38 million shares, which was higher than the stock’s 3-month average volume of 4.48 million. Shares of Carnival have declined 10.84% in the past one week, since the British referendum.

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