Carnival (CCL) Surpasses Q4 Earnings, Revenue Estimates

Carnival Corporation CCL reported better-than-expected fiscal fourth-quarter 2017 results.

Earnings of 63 cents per share beat the Zacks Consensus Estimate by 13 cents but were down 6.3% year over year. Revenues of $4.3 billion beat the consensus mark by $108 million and surged 8.2% year over year. The year-over-year top-line growth was driven by strength across passenger tickets, onboard and other businesses. Tour and Other declined year over year.

Management sounded upbeat about the company’s core strategy, aimed at delivering excellent guest experiences, boosting demand through marketing programs and introducing more efficient ships. Notably, shares of Carnival have rallied 27.9% so far this year, outperforming the industry’s growth of 25.8%.

Let’s delve deeper into the numbers.

Revenues by Segments

Carnival earns revenues from its Passenger Tickets business, Onboard and Other as well as Tour and Other segments. Passenger Tickets revenues increased 9% year over year to $3.13 billion. Onboard and Other revenues were $1.09 billion, up 7.1% year over year. Tour and Other revenues decreased 17.1% year over year to $35 million.

Carnival Corporation Revenue (TTM)

Carnival Corporation Revenue (TTM) | Carnival Corporation Quote

Expenses

Net cruise costs (in constant dollar) per available lower berth day (ALBD), excluding fuel and impairments, increased 6.1% and was within the September guidance of 6-7% increase. Gross cruise costs (including fuel) per ALBD in current dollars increased 9.7%.

Balance Sheet

Carnival exited the fourth quarter with cash and cash equivalents of approximately $395 million, down from $489 million in the prior quarter. Trade and other receivables were $312 million, down from $324 million in the previous quarter. Long-term debt was approximately $7 billion.

Cash from operations was around $1 billion. Carnival spent $648 million on capital expenditures and $290 million on dividends during the fourth quarter.

First Quarter 2018 Guidance

Fiscal first-quarter 2018 net revenue yields in constant dollars are expected to increase in the band of 1.5-2.5% year over year. Net cruise costs, excluding fuel per ALBD, are anticipated to rise in the range of 2-3% from the prior year figure, on a constant dollar basis.

Based on the above factors, the company expects adjusted earnings per share in the range of 37 to 41 cents. Changes in fuel prices and currency exchange rates are likely to reduce earnings  by 2 cents in fiscal first quarter 2018. Currently, the Zacks Consensus Estimate for earnings is pegged at 46 cents per share.

Fiscal 2018 Guidance

The company anticipates fiscal 2018 adjusted earnings per share in the range of $4 to $4.3 compared with fiscal 2017 adjusted earnings per share of $3.82.

Based on current booking trends, the company expects fiscal 2018 net revenue yields in constant currency to be up approximately 2.5% compared to the previous year. Also, the company expects fuel costs for fiscal 2018 to be up nearly $117 million year over year.

Management noted that cumulative advance bookings for fiscal 2018 are well ahead of the year-ago level at significantly higher prices.

Zacks Rank and Stocks to Consider

Carnival has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Consumer Discretionary sector include Camping World Holdings CWH, Care.com CRCM and SP Plus Corp. SP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings per share growth rate for Camping World, Care.com and SP Plus is projected to be 16.5%, 15% and 10%, respectively.

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