Tuesday, cruise and vacation company Carnival Corp. & plc (CCL, CUK, CCL.L) reported a 10% increase in first-quarter profit, helped by one-time gains as well as lower costs. In addition, the company issued an earnings outlook for the second quarter, which is below analysts' consensus, and slashed its earnings forecast for 2009.

The Miami, Florida-based company's first quarter net income increased to $260 million, or $0.33 per share, from $236 million, or $0.30 per share, in the same period last year. In December, the world's largest cruise operator had forecast earnings in the range of $0.20-$0.22 per share for the first quarter.

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.

On average, 14 analysts polled by Thomson Reuters expected the company to earn $0.19 per share for the quarter. Analysts' estimates typically exclude special items.

Quarterly revenues declined to $2.864 billion from $3.152 billion reported last year. Analysts estimated first-quarter revenues of $2.87 billion. Revenue from passenger tickets dropped to $2.219 billion from $2.438 billion in the prior year, while onboard and other revenues declined to $634 million from $702 million.

On a constant dollar basis, net revenue yields, or revenue per available lower berth day, decreased 5.2% for the latest period. Net revenue yields in current dollars decreased 11.1% due to unfavorable currency exchange rates.

Excluding fuel, net cruise cost per available lower berth day, or ALBD, for the first quarter was 1.4% higher on a constant dollar basis due to higher dry-dock costs. Including fuel, net cruise costs per ALBD decreased 9.2% on a constant dollar basis.

Costs and other expenses declined to $2.553 billion from $2.840 billion in the prior-year period. The company also reported other income of $19 million in the just concluded period that includes a $15 million gain from the unwinding of a lease out and lease back type transaction, a surge from $2 million in other income reported last year.

The company had an income tax benefit of $22 million compared to $10 million last year. In the latest period, income tax benefit included a $17 million gain from the reversal of uncertain income tax position liabilities, which were no longer required.

Commenting on first quarter results, the company's Chairman and CEO Micky Arison said, Considering the economic climate, achieving higher quarterly net income is quite remarkable. The effect of lower revenue yields resulting from the pull back by the consumer was offset by the fall in fuel prices from prior year levels. Our continued focus on cost controls also played a meaningful role in our ability to achieve such positive results.

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 fourth quarter quarter increased 6% to $3.30 billion from $3.12 billion in the same quarter last year.

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.

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.

Carnival said Tuesday that since the start of the calendar year, booking volumes for the remaining three quarters are running 10% ahead of the prior year, but at significantly lower prices. At this time, cumulative advance bookings for the remainder of the year are still behind last year's levels as the booking curve has moved closer to sailing date. Ticket prices for these bookings are also at substantially lower levels.

The company noted that despite the challenging economic environment, it has been a solid wave season thus far with several of Carnival's brands achieving record booking volumes. The first three months of the calendar year, called the Wave Season, is an important period for cruise operators as traditionally this is a strong booking period for the sector.

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.

Further, based on current fuel prices and currency exchange rates, the company said it expects earnings for the second quarter of 2009 to be in the range of $0.30-$0.32 per share, down from $0.49 per share in 2008. Wall Street looks for second quarter earnings of $0.33 per share with the estimates in the range of $0.16-$0.47 per share.

Second quarter constant dollar net revenue yields are expected to decline 8%-10%, which is down 15%-17% on a current dollar basis. Net cruise costs excluding fuel for the second quarter are expected to be nearly 4% higher on a constant dollar basis due in part to the timing of certain expenses, including advertising, dry-dock and repairs and maintenance.

The company further reduced its 2009 earnings per share guidance to a range of $2.10-$2.30, compared to its previous guidance of $2.25-$2.75. Analysts look for full year earnings in the range of $1.57-$2.50 per share with a consensus of $2.18 per share.

While announcing the fourth-quarter results in December 2008, Carnival had lowered its fiscal year 2009 earnings outlook to $2.25-$2.75 per share from its prior guidance of $2.50-$3.00 per share, citing a tough economic environment for the travel industry.

The company now expects full year net revenue yields, on a constant dollar basis, to decrease 10%-12%, compared to 6%-10% December guidance, as a result of the further deterioration in the U.S. and European economies.

Carnival now sees a 16%-18% decline in net revenue yields on a current dollar basis for full year 2009, compared to 2008, caused by the weakening of foreign currencies against the U.S. dollar.

The company expects net cruise costs excluding fuel for the full year 2009 to be in line with the prior year on a constant dollar basis, compared to an increase of 2% in its December guidance.

CCL is currently trading at $23.36, up $0.05 or 0.21%, on 6.64 million shares. For the past year, the stock moved in the range of $14.85-$43.54.

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