Carnival Expects Strong 2012 Despite Some Headwinds

Carnival Corporation is expecting a strong 2012, but because of its larger global deployment and worldwide events, the uncertainty factor is also increasing. The company earnings forecast for 2012 is in the range of $2.55 to $2.85, with a mid-range of $2.70, that is, a $0.30 range compared to a $0.20 range in the past. According to Carnival executives, speaking on today’s earnings call, foreign exchange fluctuations and fuel prices are expected to offset a 4.8 percent capacity increase for a 1.5 yield improvement for the year.

At this point, on the whole, the different brands have reported increased bookings, but at lower prices for 2012.

Howard Frank, vice chairman and COO, said that Southern European markets were challenging, but the U.S. market is holding up well, except for European cruises.

Cruise (operating) costs for next year are forecast to be flat. According to David Bernstein, executive vice president and CFO, a 10 percent change in fuel prices will have a $225 million impact or $0.29 per share, and a 10 percent change in foreign currency values will have a $0.25 impact per share.

Bernstein also noted that fuel consumption per available berth day was down 4 percent in 2011, thanks to savings efforts, and that fuel consumption has been reduced by 15 percent since 2005. Of course, these savings have partially been offset by higher fuel prices. For 2011, the price of fuel is up 32 percent over last year.

Q1 2012 earnings are expected to be lower than for 2011 due to fuel costs and the timing of drydockings. By Q2, however, Carnival expects to be back on a positive earnings growth course.

The North American fleet will be deployed 65 percent in the Caribbean in Q1, the same as last year. The European brands will have 22 percent of their capacity in the Caribbean, 19 percent in Europe, down from 22 percent last year, and 18 percent in South America, up from 16 percent last year.

For Q2, the North American brands will have 56 percent of their capacity in the Caribbean, and the European brands, 53 percent, down from 55 percent last year.

For Q3, the North American brands will have 39 percent of their capacity in the Caribbean, up from 36 percent last year, 24 percent in Alaska and 29 percent in Europe. The European brands will be 88 percent deployed in Europe.

Micky Arison, chairman and CEO, commented that Carnival’s strategy continues to be introducing two to three new ships a year, while also continuing to move older ships out of the fleet.

With a significant free cash flow, $1.3 billion was returned to shareholders this year in the form of dividends and share repurchases, and the plan is to continue to do so in the future.

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