Sunday, September 26, 2010

Reading Between Lines of Carnival Corporation 3rd Quarter Earnings

Carnival Corporation & PLC is a global cruise company and one of the largest vacation companies in the world. Their portfolio of leading cruise brands includes Carnival Cruise Lines, Holland America Line, Princess Cruises and The Yachts of Seabourn in North America; P&O Cruises, Cunard Line and Ocean Village in the United Kingdom; AIDA in Germany; Costa Cruises in Southern Europe; Iberocruceros in Spain; and P&O Cruises in Australia.

Carnival LogoHolland America LogoCunard Logo

P&O Australia Logo
P&O LogoOcean Village Logo
Seabourn LogoCosta LogoIbero LogoPrincess Logo

Carnival Corporation & PLC (NYSE/LSE: CCL; NYSE: CUK) reported net income of $1.3 billion, or $1.62 diluted EPS, on revenues of $4.4 billion for its third quarter ended August 31, 2010. Net income for the third quarter of 2009 was $1.1 billion, or $1.33 diluted EPS, on revenues of $4.1 billion.

Carnival Corporation & plc Chairman and CEO Micky Arison noted that earnings per share for the third quarter 2010 increased 22 percent over 2009 and were just 3 percent shy of third quarter record profits. The third quarter 2010 operating results were significantly better than anticipated in the company’s June guidance due to the combination of higher than expected revenue yields and lower than expected unit costs.

Commenting on the third quarter, Arison said, “Despite ongoing economic concerns, cruise ticket prices remained strong close to sailing rewarding consumers that booked early. We enjoyed robust demand across all products during our seasonally strong summer period. Our North American brands experienced a significant rebound in peak season revenue yields, increasing more than 10 percent over weak 2009 comparisons.

Revenue yields for our European brands, which absorbed an 8 percent capacity increase, were up 1 percent (constant dollars) cycling relatively strong performance in the prior year. At the same time, our ongoing cost control efforts continued to bear fruit as we drove down operating, selling and administrative costs globally.”

Book Early for Best Prices

There were some key points in the press release from Carnival.   Note that the cruise price close to the actual sailing date stayed strong which means that the early bird gets the worm and those thinking they'd get some sort of last minute deal were very disappointed.   This is no surprise to us.    We have been advising our clients to book early and not to expect last minute discounts. 

People are Vacationing Again

The North American brands continue to perform well as customers return to the seas in hopes of some tranquil waters away from their daily grinds.  Cruising continues to offer great value for your dollar.

Arison noted, “The booking environment has remained solid and we expect revenue yields to continue to improve in 2011 and beyond as the economy regains its footing. Consumers continue to embrace vacations as a much needed escape from the rigors of daily life, while cruising remains an increasingly attractive option for those seeking greater value for their vacation dollar.”

Carnival Corporation Adds New Ships

Continuing with its strategic growth initiatives, the company took delivery of Holland America Line’s 2,106-passenger Nieuw Amsterdam, and signed a new ship order with Germany’s Meyer Werft for the construction of a 2,192-passenger cruise ship for AIDA Cruises to be delivered spring 2013. This marks the seventh new ship ordered for the flourishing German cruise market in the past six years. 

During the fourth quarter Cunard Line’s 2,092-passenger Queen Elizabeth will be christened by Her Majesty Queen Elizabeth II in a much anticipated ceremony in Southampton, England. This will be the sixth ship to be delivered this year furthering the company’s strategy to expand its global presence.

What Does Added Capacity Mean

Carnival Corporation is not the only cruise line that has added new ships to their inventory in recent years.  The extra capacity should mean competitive pricing for Winter months as most ships reposition to the Caribbean for those cold months.   We suggest booking when you see what sounds like a good deal, because as the ships fill up, pricing will continue to rise to help maintain record profits.

CLIA's WLCN is just days away -- watch for special offers from Carnival and the other cruise lines.  It is wise to work with a cruise specialist to be sure you are getting the right cruise for you at a value.

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