Carnival Eyeing Rough Waters on Ship Repair Costs

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Published March 15, 2013

| FOXBusiness

Troubled cruise-ship operator Carnival (CCL) beat its own expectations for first-quarter earnings, but ship woes that continued Friday weighed on the company’s outlook for the rest of its fiscal year.

Shares of Carnival slipped 2.32% to $34.90 in early morning trading, while the stock was down 4.3% in the last month as of Thursday’s close.

The Miami-based company swung to a net profit of $37 million and per-share earnings of five cents amid expenses that lowered 5.9%, a year after reporting a loss of $139 million, or 18 cents a share. Adjusted per-share earnings to exclude one-time items checked in at eight cents, up from two cents.

In December, Carnival projected adjusted per-share earnings of three cents to seven cents.

Revenue for the first quarter was up 0.3% to $3.59 billion, above Wall Street’s expectation for $3.56 billion.

But Carnival, the world’s largest cruise operator, said ship repair costs in the wake of several mechanical problems will show up later in the year. It lowered its view for the current quarter to adjusted earnings of between four and eight cents a share versus analysts’ projection of 29 cents a share.

For the full fiscal year, the company anticipates adjusted per-share earnings of $1.80 to $2.10. Analysts were looking for $2.35 a share.

Chief Executive Micky Arison did say booking volumes since January are running much higher over last year at slightly higher prices. Carnival still expects more than $3 billion in cash from operations for the full year.

However, advanced bookings for 2013 are behind the prior year at consistent prices.

“Despite considerable attention surrounding the Carnival Triumph, we had been encouraged to see booking volumes for Carnival Cruise Lines recover significantly in recent weeks,” Arison added in a statement.

“Attractive pricing promotions, combined with strong support from the travel agent community and consumers who recognize the company's well-established reputation and quality product offering, were driving the strong booking volumes.”

This week, Carnival’s ship woes continued with two more technical malfunctions. The company said on Friday one of its cruise ships, the Legend, experienced technical difficulties that affected its sailing speed on the last leg of its journey. Carnival canceled the ship’s stop on Grand Cayman, Cayman Islands, and said it will travel directly to its home port in Tampa, Fla.

The company will give each passenger of the Legend a $100 credit and a 50% discount off a future Carnival cruise.

On Thursday, Carnival said the Dream, which had 5,600 passengers and crew, was stuck at a port in St. Maarten after its emergency diesel generator malfunctioned. The company was arranging to have as many as 4,300 passengers flown home.

The troubles for Carnival this year began with the Triumph, a ship that was left adrift in the Gulf of Mexico for nearly a week last month. The ship was inoperable due to an engine fire and was towed to Mobile, Ala., after about five days.

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