Carnival's cruise ship Costa Concordia capsized off the coast of Italy earlier this month, killing at least 17 people. Fifteen people are still missing. The wreck is expected to lie near the Italian island of Giglio until the end of the year or longer before it can be broken up or salvaged.
Miami-based Carnival, the world's biggest cruise operator, said in a regulatory filing on Monday that it would take a profit hit ranging from $155 million to $175 million this year because of the January 13 accident.
It said it was too soon to tell what the other financial effects could be.
We anticipate other financial impacts to our business, including lower net revenue yields, that are not possible to reasonably determine at this time, Carnival said in the filing with the U.S. Securities and Exchange Commission.
Morningstar analyst Jaime Katz said the company may have lower net revenue yields this fiscal year if it has to lower prices to keep up bookings.
Net revenue yields reflect the amount a cruise company makes from its passengers after removing expenses.
If they have to compromise on pricing, that kind of flows all the way down to the bottom of the income statement and (could) be a drag on total earnings, she said.
The company's fiscal year ends in November. Carnival did not immediately return a call seeking comment.
Carnival explained in the filing that the $155 million to $175 million hit to net income would come from several areas.
We self-insure for loss of use of the ship, which we expect to impact the 2012 full year net income by approximately $85 million to $95 million, it said. It said insurance deductibles will reduce net income by another $40 million and other incident-related costs will be between $30 million and $40 million.
Carnival had earlier estimated full-year earnings of $2.55 to $2.85 a share. The company now says it will give a revised earnings forecast in March.
There are still pieces of information that might not be complete, said Katz, who after the accident was expecting full-year earnings per share of $2.42. She is now lowering her estimates.
I would anticipate that the Street will come down and the inferred earnings per share comes to about $2.05-$2.35. That is a pretty big move, she said.
Carnival also said it significantly reduced its marketing activities after the disaster. Excluding its Costa European subsidiary, Carnival said fleet-wide booking volumes, from after the accident through January 25, declined in the mid teens from the previous year.
Costa's booking activity is difficult to interpret because of the significant rebooking activity stemming from the loss of the ship's use and related re-deployments, the company said.
However, we believe it to be down significantly. Despite these recent trends, we believe the incident will not have a significant long-term impact on our business.
Carnival is assessing the damage to the ship to determine whether it can be repaired and what the cost would be.
If the ship can be repaired, Carnival said, it would be out of service for the remainder of fiscal 2012 if not longer.
Carnival shares ended 1.1 percent lower at $30.13 on the New York Stock Exchange on Monday.
(Reporting by Nivedita Bhattacharjee in Chicago, with Tim McLaughlin in Boston; Editing by Maureen Bavdek, Steve Orlofsky and Matthew Lewis)