Carnival Announces Earnings and Another Broken Boat

On Friday Carnival CCL announced earnings and yes, another mechanical problem with one of its ships—the second this week.

First the earnings. Q1 revenue was $3.59 billion versus consensus of $3.56 billion. This is in line with the prior year according to the company release.  First quarter earnings were better than guidance given in December due to the timing of certain expenses. EPS was $0.02 in line with the consensus of the same figure.

The company was also helped by a 4 percent decrease in fuel costs and a 5 percent decrease in fuel consumption.

Carnival said that 2013 advance bookings are behind the prior year with prices in line with prior year levels. According to the release, "Booking volumes during our seasonally strong wave period have remained solid with pricing comparisons improving in recent weeks. However, economic uncertainty in Europe continues to hinder yield growth." 

The company also states that it expects 2013 revenues to be in line with the prior year. This is a change from December where it provided guidance of up 1 to 2 percent year over year. Non-GAAP diluted EPS is now forecasted at $1.80 to $2.10.

“We continue to expect over $3 billion of cash from operations this year and remain committed to returning free cash flow to shareholders in 2013 and beyond."

Shares are down nearly 5 percent in early trading largely due to the company’s guidance but the Carnival embarrassment du jour can’t be helping either.

Reuters reported Friday that the Carnival Legend was on the last leg of a seven-day Caribbean cruise when it experienced technical difficulties that was affecting its cruising speed. This prompted the vessel to cancel a stop at Grand Cayman, Cayman Islands and head directly to its home port in Tampa, Florida.

Of course, that means more refunds. The company will offer a $100 credit and offer a 50 percent off voucher to affected passengers. Carnival said that all safety systems as well as hotel systems (fancy term for toilets) are functioning normally.

This comes just one day after Carnival announced that another of its ships, the Carnival Dream was docked in St. Maarten after mechanical difficulties. Those passengers are being flown back to the United States. And nobody has forgotten the Carnival Triumph incident that kept passengers stranded at sea for days.

How will all of these problems affect bookings? If there is any good news for investors, today’s earnings release said this:

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