Carnival Earnings Beat Estimates On Weak Revenue, Stock Sets Sail Higher

Embattled cruise line operator Carnival Corp. CCL, who has made headlines recently for mishaps at sea, reported second quarter earnings before the bell Tuesday that beat forecasts on weaker than expected revenue. The company also guided below Wall Street forecasts for the third quarter and for the full year.

Second Quarter Results

For the second quarter of 2013, Carnival reported earnings per share of $0.09, far outpacing the consensus Wall St. forecast of $0.06 by 50 percent. Earnings per share also rose nicely from the $0.03 earned in the second quarter of 2012, posting growth of 200 percent.

Revenue in the quarter was weaker than estimated which kept gains muted. Carnival reported revenue of $3.5 billion in the second quarter, below the consensus forecast of $3.56 billion by 1.69 percent. Revenue declined from the second quarter of 2012 when the company reported revenue of $3.54 billion, representing a sequential decline of 1.12 percent.

Chairman Micky Arison noted, “Our 90,000 global team members are dedicated to delivering an outstanding vacation experience to 10 million guests each year. The level of quality, variety and innovation available throughout our fleet has never been greater and our guests are reaping the benefits of truly exceptional vacation values. We are working to more broadly communicate that message through stepped up consumer and trade marketing efforts, as well as strengthened engagement of our travel agent partners. We believe these initiatives, combined with slower supply growth, will lead to increased yields.”

Financial Highlights

In the second quarter, Carnival saw net cruise costs excluding fuel increase 8.8 percent while gross costs actually declined 0.1 percent. Net costs increased sharply due to the timing of dry-dock expenses, vessel repair costs and non-recurring items.

Positively, Carnival was able to decrease its fuel expenses by 9.7 percent in the quarter while decreasing consumption only 5.7 percent. Also, one new ship came online and another came back online after a modernization upgrade.

Guidance

For the third quarter of 2013, Carnival now expects earnings per share to be between $1.25 and $1.33, lower than the consensus Wall Street forecast of $1.38 per share. Carnival's full year guidance was also slightly weak as the company now sees fiscal year EPS between $1.45 and $1.65 compared to the estimated $1.60 by analysts.

Management Shake-Up

Carnival also issued a separate statement Tuesday morning in which it disclosed that it was separating the roles of CEO and Chairman. Former CEO Micky Arison will continue to serve as Chairman of the Board of the company and Arnold W. Donald will take over as CEO.

Shares Rise

Carnival's stock rose 3.43 percent in early Tuesday trade on the earnings beat. Shares traded at $34.37, still well below the 52-week high of $39.95.