Carnival Corporation announced financial results for the third quarter ended August 31, 2019 and provided an outlook for the full year, fourth quarter 2019 and 2020.
The company reported U.S. GAAP net income of $1.8 billion, or $2.58 diluted EPS, for the third quarter of 2019, higher than U.S. GAAP net income for the third quarter of 2018 of $1.7 billion, or $2.41 diluted EPS.
Third quarter 2019 adjusted net income was $1.8 billion, or $2.63 adjusted EPS, higher than adjusted net income of $1.7 billion, or $2.36 adjusted EPS, for the third quarter of 2018. Adjusted net income excludes net charges of $39 million for the third quarter of 2019 and net gains of $34 million for the third quarter of 2018.
Total revenues for the third quarter of 2019 were $6.5 billion, higher than the $5.8 billion in the prior year.
The company expects full year 2019 adjusted earnings per share to be in the range of $4.23 to $4.27, reflecting recent fuel price increases, compared to June guidance of $4.25 to $4.35 and 2018 adjusted earnings per share of $4.26.
Gross revenue yields (revenue per available lower berth day or “ALBD”) increased 5.6 percent in the third quarter.
Gross cruise costs including fuel per ALBD increased 9.4 percent. In constant currency, net cruise costs excluding fuel per ALBD decreased 3.2 percent, better than June guidance of up 0.5 to 1.5 percent, due to the timing of expenses between quarters and cost improvements realized during the quarter.
Changes in fuel prices increased earnings by $0.07 per share, offset by a decrease in earnings due to changes in currency exchange rates of $0.07 per share compared to the prior year. Compared to June guidance, changes in fuel prices and currency exchange rates decreased earnings by $0.03 per share.
Carnival Corporation & plc President and Chief Executive Officer Arnold Donald stated: “I thank our 150,000 global employees for their efforts to deliver a record quarter in an otherwise challenging year. We achieved additional cost improvements largely driven by leveraging our scale, offsetting the earnings impact due to voyage disruptions from the combined impact of Hurricane Dorian, the tensions in the Arabian Gulf and the delayed delivery of Costa Smeralda. A further reduction in guidance for ticket and onboard revenue worth $0.06 per share in part contributed to by the high level of close-in voyage disruptions was also offset. However, due to an $0.08 impact from the recent spike in fuel prices caused by geopolitical events, we are reducing our full year guidance for 2019 by $0.05 per share.”
Based on current booking trends, the company expects full year 2019 constant currency net cruise revenues to be up approximately 4.0 percent, with capacity growth of 4.2 percent. The company continues to expect its North America and Australia segment yields to be up for the year, but slightly less than previous guidance while its Europe and Asia segment is still expected to be down for the year but slightly more than previous guidance. The company expects full year net cruise costs excluding fuel per ALBD in constant currency to be up approximately 0.3 percent versus the prior year compared to June guidance of up approximately 0.7 percent, according to a press release.
Weather related voyage disruptions, the tensions in the Arabian Gulf and a ship delivery delay are expected to have a financial impact of $0.04 to $0.06 per share compared to June guidance. Changes in fuel prices and currency exchange rates are expected to decrease earnings by $0.08 per share also compared to June guidance. Taking the above factors into consideration, the company expects full year 2019 adjusted earnings per share to be in the range of $4.23 to $4.27, reflecting recent fuel price increases, compared to June guidance of $4.25 to $4.35 and 2018 adjusted earnings per share of $4.26.
Fourth quarter constant currency net revenue yields are expected to be down 2.0 to 3.0 percent compared to the prior year. Net cruise costs excluding fuel per ALBD in constant currency for the fourth quarter are expected to be up 4.0 to 5.0 percent compared to the prior year. Changes in fuel prices and currency exchange rates are expected to increase earnings by $0.06 per share compared to the prior year. Voyage disruptions due to weather, a ship delivery delay and the previously announced U.S. government’s policy change on travel to Cuba are expected to have a financial impact of approximately $0.07 to $0.09 per share. Based on the above factors, the company expects adjusted earnings per share for the fourth quarter 2019 to be in the range of $0.46 to $0.50 versus 2018 adjusted earnings per share of $0.70.
Cumulative advanced bookings for the first half of 2020 are ahead of the prior year at prices that are in line compared to 2019 on a comparable basis. Since June, both booking volumes and prices for the first half of next year have been running lower than the prior year.
For full year 2020, the company expects capacity growth of approximately 7 percent. As previously indicated, in 2020 the company will increase its usage of MGO as a percent of total fuel consumption as a result of the IMO sulfur emission regulations. MGO is currently anticipated to represent approximately 40 percent of fuel consumption for full year 2020 compared to approximately 20 percent for full year 2019. Using fourth quarter September guidance fuel prices, fuel expense for full year 2020 is expected to be $1.8 billion compared to $1.6 billion expected for full year 2019. The company currently expects depreciation to be approximately $2.4 billion for full year 2020 compared to $2.2 billion for full year 2019.
Donald added: “As a truly global cruise company, with nearly 50 percent of our guests sourced outside of the U.S., we are facing a number of current headwinds, including weakening economies affecting our Europe & Asia segment, a strong dollar and of course, the IMO 2020 regulations, and we are working to mitigate them.
“We have taken actions to bring capacity in Southern Europe more in line with demand, reflecting the current conditions which have been heavily influenced by ongoing economic malaise, the uncertain geopolitical environment and recent trends in consumer confidence,” he said. “We have also made close-in deployment changes, including those made to address the recent situation in the Arabian Gulf, which has had an impact on recent booking trends and ticket prices. While we are subject to uneven economies in the short run, the global aspect of our business has proven to be a strength over time, producing our industry leading position with over $5 billion in cash from operations, attractive returns on capital and the strongest balance sheet in the industry.”
