After a tumultuous couple of years, Carnival Corp. (NYSE: CCL) appears to have survived one of the worst environments imaginable for its cruise line operations. It remains to be seen how smooth the sailing will be going forward, but Carnival and its archrival continue to add ships to their fleets.
Recent Results
Full-year sales fell 10% to $13.2 billion, but the fourth-quarter decline was more moderate at 2.9% as sales came in at $3.2 billion. Carnival CEO Mickey Arison declared that the company had "weathered the most challenging economic environment in the company's history exceptionally well". Recent trends did come in stronger than archrival Royal Caribbean (NYSE: RCL), which saw a 14% top-line decline during its most recent Q3.

Carnival's full-year net income fell 23.2% to $1.8 billion while Q4 net income was nearly halved, falling 48% to $193 million, as selling and administrative costs grew 4.2% and total expenses increased 2.1%. Full-year diluted earnings were $2.24 per share while Q4 earnings came in at 24 cents per share.

Carnival said to expect Q1 earnings between 8 cents and 12 cents per share, which will be down significantly from the 33 cents it reported in last year's Q1. Analysts are currently projecting a full-year (ending November 2010) sales increase of 10.2% to $14.5 billion and earnings of $2.28 per share.

Bottom Line
Carnival and Royal Caribbean appear to be seeing smoother sailing after an extremely choppy period in which customer bookings sank, and fears were high that credit markets would be unable to help finance the billions it takes to build new cruise ships. In fact, Royal was recently able to secure just over $1 billion to fund its new "Allure of the Seas" ship.

Both cruise lines operate an effective duopoly, with a few small players such as Disney (NYSE: DIS) that operate a handful of ships. But the fact remains that building and maintaining a vast network of ships is very capital intensive and requires outside capital to expand, which has shaken confidence in the two firms' leading market positions and recently caused them to curtail their generous dividend payments. (Learn more about the importance of dividends; see Your Dividend Payout: Can You Count On It?)

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Tickers in this Article: CCL, RCL, DIS

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