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Tickers in this Article: CCL, RCL
Carnival Corporation (CCL) reported second quarter 2012 adjusted earnings of 20 cents per share, breezing past the Zacks Consensus Estimate of 8 cents per share. Reported earnings, however, deteriorated from the year-ago quarter earnings of 26 cents. Total revenue in the second quarter of 2012 decreased 2.3% year over year to $3,538 million and also fell short of the Zacks Consensus Estimate of $3,556 million.

On a constant currency basis, net revenue yields dipped 1.4% year over year. Gross revenue yields also fell 4.2% at current dollars. Net cruise costs, excluding fuel per available lower berth day (ALBD), decreased 2.2% year over year on a constant dollar basis. Fuel price of $756 per metric ton was up 12.0% year over year.

Segment Revenue

Passenger Tickets: Revenue declined to $2,675 from $2,778 million in the year-ago quarter.

Onboard and Other: Revenue increased to $844.0 million from $817.0 million in the prior-year quarter.

Tour and Other: Revenue for the segment declined to $19.0 million from $25.0 million in the year-ago quarter.

Third Quarter 2012 Guidance

Management expects net revenue yield on a constant dollar basis, excluding the disaster of the ship Costa Concordia, to decline 3.0% to 4.0% and decrease 6.0% to 7.0% including Costa. Net cruise costs per ALBD, excluding fuel are expected to be down 0.5% to 1.5% on a constant dollar basis. Net cruise costs per ALBD, excluding fuel, are projected to be down 4.0% to 5.0% on a current dollar basis.

Changes in currency exchange rates, partially offset by lower fuel prices, are expected to reduce the earnings by 3 cents per share compared to the prior year.

Based on current fuel prices and currency exchange rates, the company expects adjusted diluted earnings in the range of $1.42 to $1.46 per share.

Full Year 2012 Guidance

Carnival expects net revenue yields on a constant dollar basis, excluding Costa, to be slightly lower than the year-ago quarter, but including Costa the company predicts a decrease in the range of 3% to 4% in net revenue yield.

Net cruise costs per ALBD, excluding fuel, are projected to be down 0.5% to 1.5% on a constant dollar basis. Net cruise costs per ALBD, excluding fuel, are projected to be down 2.5% to 3.5% on a current dollar basis.

Fuel expenses are estimated at $677.0 per metric ton. Carnival has raised its non-GAAP earnings in the range of $1.80 to $1.90 per share from its previous outlook of $1.40 to $1.70 per share. The company has increased its earnings expectation mainly on the back of its expansion strategy in North America and Western Europe and opportunities in emerging cruise markets of China and Japan.

Our Take

We believe that Carnival is recovering at a good pace from the Costa disaster. The company is also experiencing increase in booking volumes and we think that in due course of time, booking volumes will improve more.

Moreover, we believe that a strong balance sheet and solid cash generation capacity should bode well for Carnival. The Zacks Consensus Estimates for 2012 and 2013 are currently pegged at $1.68 and $2.40, respectively.

Carnival, which competes with Royal Caribbean Cruises Ltd. (RCL), currently retains a Zacks #2 Rank (short-term Buy rating). We also reiterate our long-term Neutral recommendation on the stock.

 
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