Thursday, cruise and vacation company Carnival Corp. & plc (CUK, CCL, CCL.L) cut its earnings outlook for the second quarter and fiscal year 2009 below analysts' estimates. The revised outlook assumes strengthening of the U.S. dollar against the euro as well as pound sterling, and an increase in fuel costs.

In a filing with the U.S. Securities and Exchange Commission on Thursday, the company lowered its earnings outlook for the second quarter by $0.01 per share from the prior outlook in a range of $0.30-$0.32 per share. This compares to earnings of $0.49 per share in the prior-year period. On average, fourteen analysts polled by Thomson Reuters expect the company to report earnings of $0.32 per share for the second quarter. Analysts' estimates typically exclude special items.

The company's revised outlook projects fuel costs per metric ton for the second quarter to increase to $294 from the prior forecast of $285, while the dollar is expected to strengthen against the pound sterling as well as the Euro by one cent each.

For fiscal year 2009, Carnival lowered its earnings outlook by $0.06 per share, from the prior outlook in a range of $2.10-$2.30 per share. This compares to earnings of $2.90 per share in the prior year. Analysts expect the company to earn $2.14 per share for the year.

The revised outlook assumes fuel costs per metric ton for the full year to increase to $287 from the prior forecast of $279, while the dollar is expected to strengthen against the pound sterling by one cent and against the Euro by two cents.

The company said that due to the ongoing uncertainty in market conditions, which may negatively impact the performance of its reporting units, it will continue to monitor and evaluate the carrying values of its goodwill and trademarks. Further, the company said that if market and economic conditions or the business performance of its units deteriorate significantly, then it would perform interim impairment reviews. Any such impairment reviews could result in recognition of a goodwill and/or trademark impairment charge in 2009 or thereafter, the company noted.

The economic turmoil has had a negative impact on the travel industry forcing people to cancel bookings or postpone them. With companies restricting spending, corporate pleasure trips also dropped significantly. All these factors forced cruise operators to take measures such as lower fares or offer huge discounts to fill ships.

On March 24, Carnival reported a 10% increase in profit for the first quarter from the year-ago period, helped by one-time gains as well as lower costs. The company's net income for the first quarter increased to $260 million, or $0.33 per share, from $236 million, or $0.30 per share, in the same period last year. The company noted that operating results in the first quarter were better than its December guidance due primarily to lower than expected net cruise costs and stronger than expected net revenue yields on close-in bookings.

Quarterly revenues declined to $2.864 billion from $3.152 billion reported last year as savings from lower fuel failed to offset a drawback in consumer demand.

At that time, Carnival forecast earnings for the second quarter in a range of $0.30-$0.32 per share. The company also reduced its 2009 earnings guidance to a range of $2.10-$2.30 per share from the prior outlook in a range of $2.25-$2.75 per share.

In October 2008, the company said it will suspend its dividend for the next quarter in order to preserve cash in the highly volatile economic environment. The suspension of dividend is expected to help it save about $1.3 billion a year and fund its 2009 capacity growth without accessing credit markets. Carnival plans to maintain the dividend suspension throughout 2009, but said it would reevaluate the dividend policy based on the circumstances prevailing during the year.

In Thursday's regular trading session, CUK is trading at $25.34, up $1.41 or 5.89% on a volume of 0.25 million shares. The stock has been trading in a range of $15.24-$43.00 in the past 52 weeks.

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