Carnival Corporation & plc announced non-GAAP net income of $80 million, or $0.10 diluted EPS for the second quarter of 2014 compared to non-GAAP net income for the second quarter of 2013 of $57 million, or $0.07 diluted EPS.
For the second quarter of 2014, U.S. GAAP net income, which included a net gain on vessel transactions of $15 million and net unrealized gains on fuel derivatives of $11 million, was $106 million, or $0.14 diluted EPS. For the second quarter of 2013, U.S. GAAP net income, which included a gain on a ship sale of $15 million and unrealized losses on fuel derivatives of $31 million, was $41 million, or $0.05 diluted EPS. Revenues for the second quarter of 2014 were $3.6 billion, compared with $3.5 billion the prior year.
Carnival Corporation & plc President and CEO Arnold Donald noted that second quarter earnings were significantly better than anticipated in the company's March guidance due to better than expected net revenue yields for most of the company's cruise brands, as well as lower than expected net cruise costs.
Donald noted, "We benefited from effective marketing initiatives, which combined with a gradually improving economic environment, led to revenue yield improvement for our continental European brands in the quarter compared to the prior year and is expected to continue through the remainder of the year. In addition, we achieved a six percent improvement in fuel consumption."
Donald also noted that during the second quarter Princess Cruises' new Regal Princess debuted in Europe, boasting a wide variety of stunning features including The SeaWalk, a glass-bottomed walkway extending beyond the edge of the vessel, 128 feet above the sea. Additionally, Princess launched its first homeport cruise program from China in May with the start of a four-month series of voyages from Shanghai on Sapphire Princess. Also in May, Costa Cruises announced that it will position Costa Serena in China next year, bringing the company's total to four ships based in the world's fastest growing cruise market. The company believes it is the largest provider of cruise vacations home-ported in China.
Key metrics for the second quarter 2014 compared to the prior year were as follows:
- On a constant dollar basis, net revenue yields (net revenue per available lower berth day or "ALBD") decreased 2.2 percent for 2Q 2014, which was better than the company's guidance of down 3 to 4 percent. Gross revenue yields decreased 0.5 percent in current dollars.
- Net cruise costs excluding fuel per ALBD increased 1.2 percent in constant dollars, primarily due to higher dry-dock costs, as well as advertising and promotion expenses. Costs were better than March guidance, up 2.5 to 3.5 percent. Gross cruise costs including fuel per ALBD in current dollars decreased 0.9 percent.
- Fuel prices declined 3.7 percent to $657 per metric ton for 2Q 2014 from $683 per metric ton in 2Q 2013 but were higher than March guidance of $649 per metric ton.
- Fuel consumption per ALBD decreased 6 percent in 2Q 2014 compared to the prior year.
Since March, fleetwide booking volumes for the next three quarters are running slightly behind last year at higher prices. At this time, cumulative advance bookings for the remainder of 2014 are slightly ahead of the prior year at higher prices.
Donald noted, "Collectively our brands are gaining momentum in our efforts to drive higher ticket prices and we continue to expect sequential improvement in revenue yields, despite a more competitive environment in the Caribbean this summer. We remain focused on further understanding our guests and refining the exceptional customer experience we provide. We have also made significant strides in our efforts to identify opportunities for cross-brand operational efficiencies. This work is still in the early stages, but we are making progress and beginning to see encouraging signs. We believe we have reached a positive inflection point for our company as we return to earnings growth in 2014 and work hard to ensure that growth accelerates in the years to come."
Total revenues are expected to be higher for the full year 2014 compared to the prior year.
The company continues to expect full year 2014 net revenue yields on a constant dollar basis to be down slightly compared to the prior year (flat to up slightly on a current dollar basis). The company now expects full year 2014 net cruise costs excluding fuel per ALBD to be flat to up slightly compared to the prior year on a constant dollar basis, which is better than had been anticipated in the March guidance. However, changes in fuel prices and currency exchange rates have reduced full year 2014 forecasted earnings by $0.06 per share compared to March guidance.
Taking the above factors into consideration, the company has increased its full year 2014 non-GAAP diluted earnings per share guidance to be in the range of $1.60 to $1.75, compared to 2013 non-GAAP diluted earnings of $1.58 per share.
Third Quarter 2014 Outlook
Third quarter constant dollar net revenue yields are expected to be flat to down 1 percent compared to the prior year due primarily to a significant industry capacity increase in the Caribbean. Net cruise costs excluding fuel per ALBD for the third quarter are expected to be 1 to 2 percent higher on a constant dollar basis compared to the prior year.
Based on the above factors, the company expects non-GAAP diluted earnings for the third quarter 2014 to be in the range of $1.38 to $1.44 per share versus 2013 non-GAAP earnings of $1.38 per share.