Carnival Cruises Into 2018

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Carnival Corporation & plc (NYSE: CCL) (NYSE: CUK) continues to coast at levels it hasn't seen since 2011. The world's largest cruise ship operator posted healthy growth for its fiscal fourth quarter on Tuesday morning, as revenue rose 8.2% to nearly $4.3 billion. Carnival has now posted back-to-back quarters of 8.2% in year-over-year growth, and you have to go back more than six years to find the last time that its top line was growing north of 8% in any financial period.

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Profitability sailed the other way. Carnival's reported earnings per share dipped to $0.76 from $0.83 a year earlier. Back out unrealized gains and losses on fuel derivatives and other net charges -- a fair approach in smoothing out its performance to get a snapshot of its actual operations given its big bets to hedge fuel costs -- and the cruising giant's adjusted profit still went from $0.67 to $0.63 a share.

Setting sail into a new quarter

Carnival's dip on the bottom line may seem problematic at first, but there were a few disruptive storms during the first few weeks of the quarter that ended in November. Carnival estimates that the hurricanes cost the company $0.11 a share in earnings. It also pegs the changes in fuel prices, including realized fuel derivatives and currency fluctuations, with clipping another $0.03 a share in profit from the quarter. In short, Carnival's bottom line looks a lot better than what was actually reported.

Carnival's top-line growth is impressive. It's been gradually expanding its fleet, but the real driver is getting passengers to pay more. Gross revenue yields -- the best measuring stick for gauging a cruise line's health; basically the revenue per available lower berth day -- rose 6.8% for the quarter. Net revenue yields rose 4.2% on a constant currency basis, well ahead of the 1.5% to 2.5% the company was targeting back in September.

The near-term outlook is bright. Bookings for 2018 are ahead of where they were at this point last year, and passengers continue to accept slightly higher rates. Carnival is targeting positive but decelerating gross revenue yields, but it also sees gross cruise costs backing down from the stubborn levels they've been at in recent quarters.

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Carnival expects to add four new ships to its fleet, including the first of the seven next-gen vessels on order that will be fully powered by liquefied natural gas. Carnival should continue to be on the cutting edge of onboard tech as it expands Ocean, the wearable device for passengers that uses Bluetooth to enhance and personalize a growing number of shipboard features. Earlier this week it struck a partnership with Univision to beef up the Spanish-language video content it produces to generate demand in landlubbers for its travel offerings.

Carnival is eyeing an adjusted profit of $4 to $4.30 a share for all of fiscal 2018, up from $3.82 in fiscal 2017. Investors should be encouraged to know that guidance a year ago for fiscal 2017 started at $3.30 a share, inching its way higher with every passing quarter to the eventual $3.82 showing. The shares are getting closer to revisiting the all-time highs that were hit in September, and the near-term prognosis remains encouraging.

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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.