Cruise and vacation company Carnival Corp. (CCL) is scheduled to report first-quarter results before the market opens on Tuesday. The company's results are expected to echo the sentiments of other firms negatively impacted by the financial crisis, although not as sharply as theirs.
The Miami, Florida-based company also markets and operates hotels or lodges in Alaska and the Yukon Territory of Canada. Additionally, the company provides motorcoaches for sightseeing and charters, domed rail cars, and dayboats, as well as various sightseeing packages.
The first three months of the calendar year, called Wave Season, is an important period for cruise operators as traditionally this is a strong booking period for the sector. However, 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.
In October 2008, Carnival decided to suspend its dividend for the following quarter to preserve cash in the highly volatile economic environment. Carnival noted at that time that the dividend suspension would help save about $1.3 billion a year and fund the company's 2009 capacity growth without accessing credit markets.
The world's largest cruise operator also said in October that it planned to maintain the dividend suspension throughout 2009, but would re-evaluate the dividend policy based on the circumstances prevailing during the year. However, more bad news was to come and in December 2008, Carnival said 2009 occupancy levels for advance bookings are running behind the prior year and that ticket prices for those bookings also are at lower levels.
In December 2008, Carnival reported fourth-quarter results, posting higher profit, as higher ticket prices for its North American brands and better cost control offset higher fuel expense. The company's net income increased to $371 million or $0.47 per share from $358 million or $0.44 per share reported for the year-ago quarter. Revenue for the quarter increased 6% to $3.30 billion from $3.12 billion in the same quarter last year.
Additionally, the company forecast earnings in the range of $0.20-$0.22 per share for the first quarter ended February 28. On average, 14 analysts polled by Thomson Reuters expect the company to earn $0.19 per share for the quarter, lower than $0.30 per share earned for the year-ago period. First-quarter revenues are estimated to be $2.87 billion. Analysts' estimates typically exclude special items.
However, some are of the view that Carnival will not be as badly hit as others by the slowdown, as bookings are done well in advance and the current credit crunch need not affect the passengers.
On February 24, Credit Suisse upgraded the company's shares to Outperform from Neutral and increased its price target to $30 from $26. The brokerage raised its earnings per share estimate for 2010 to $2.50 from $2.47, while maintaining its 2009 estimate at $2.40.
According to the brokerage, Carnival is well positioned to enhance its dominant positioning under virtually any scenario by strengthening and leveraging an already healthy liquidity profile and capitalizing on potential opportunities created by the downturn.
The firm models $500 million of incremental export liquidity this year based on OECD due diligence. Carnival also appears to have access to both the bond and bank markets at attractive rates owing to improved conditions for high-quality credits, it added.
Among others in the industry, Royal Caribbean Cruises Ltd. (RCL) in January reported that fourth-quarter net income plunged to $1.5 million or $0.01 per share from $70.8 million or $0.33 per share in the same quarter last year. Revenues for the quarter were $1.5 billion, flat with last year.
CCL closed Monday's regular trade at $23.31, up $2.01 or 9.44% from the previous close, on 12.22 million shares, compared to a 3-month average volume of 6.64 million shares.
For the period between December 1, 2008 and February 28, 2009, the shares fluctuated between $17.59 and $25.76. For the past year, the stock moved in the range of $14.85-$43.54.
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