Donald Lauds Carnival’s Performance Despite Daunting Headwinds

Open Jaw

There’s a clear pattern to initial market response to 2016 cruise company earnings reports.

Every quarter at least one of the publicly traded cruise companies reports and promotes what they describe as being good or better results, and provide upbeat statements about their outlook. Investors and analysts often look at the same data differently, and stock prices languish.

No wonder Carnival Corp. President & CEO Arnold Donald opened their Q3 earnings call with a strong and determined pitch. “Despite a series of geopolitical events that unfolded as the year progressed, including Turkey, Paris and Brussels, despite heightened concerns around Zika, around Brexit, and around China, despite fuel and currency both working against us… we have exceeded the high end of our quarterly guidance and we are raising our expectations for the year.”
During the quarter, Donald continued, Carnival Corp. delivered the highest quarterly earnings in company history with record net income of over $1.4 billion. “Despite the numerous headwinds we are well on track to achieve our new guidance.”
Donald says Carnival's 10 cruise brands continued "to outperform, particularly in the Caribbean" with continued strength in pricing for last-minute bookings. He was perhaps most pleased to report that Carnival Corp.’s European cruise business also saw improvements in revenue yield during a tumultuous time.

Despite all of Donald's "despites," Carnival Corp. stock traded following the call. The dip reflected concerns about perceived overcapacity in China. Indeed, the majority of the earnings call Q & A session involved issues about capacity changes and pricing in China. The industry has a 31% capacity increase planned for China in 2017 and Carnival Corp. reported that yields in China remain negative year over year.

But Donald’s strong statements addressing basic market concerns did eventually gain some traction later in the week as Carnival’s stock price began to rise. Reports from many financial houses were among the most positive seen this year.

Looking forward, Donald said the outlook is positive. He cited “continued strength in close-in pricing in the Caribbean and continued: "All of our major brands in North America and Europe experienced net revenue yield improvements despite the geopolitical environment in Europe. We are well on track to deliver nearly 25% earnings growth in 2016. Looking forward, our booking trends are strong heading into 2017 with higher occupancy levels at higher prices building momentum for continued earnings growth."

(will not be published)