Carnival rides on cruise demand, lower costs to lift profit outlook

12:15 pm Monday, September 30th, 2024

By Juveria Tabassum and Doyinsola Oladipo

(Reuters) -Carnival Corp raised its annual profit forecast for the third time on Monday, helped by strength in demand for cruise vacations during the summer as well as easing costs of operations.

The summer invites increased interest in vacations at sea, which has helped boost what has already been a robust year for cruise operators as more travelers, especially younger ones, opt for the experience.

“It’s not pent-up demand anymore. I think we (in the cruise industry) are all doing a pretty good job of demand generation and creation and … getting people interested in cruise,” Carnival’s CEO Josh Weinstein said on a post-earnings call.

Third-quarter revenue at Carnival, the world’s largest cruise operator, surpassed estimates at $7.90 billion, while gross margin yields in the quarter grew 19% compared to the previous year.

Enhanced itineraries, lower freight, ports, labor and fuel costs, and technologies to optimize fuel usage helped Carnival’s margins, while more direct sales also helped tame commission costs.

Carnival raised its 2024 adjusted profit per share expectation to $1.33 from $1.18, while the net yield target was raised to 10.4%.

Its third-quarter earnings per share of $1.27 beat estimates of $1.16, according to data compiled by LSEG.

However, Carnival expects adjusted cruise costs, excluding fuel, to increase by about 8% in the current quarter due to more maintenance days and higher advertising spending.

The Miami, Florida-based company’s target for fourth-quarter earnings per share of 5 cents was below estimates, taking its shares down 2%.

“We suspect there is some conservatism built into guidance as is usually the case for cruise companies. 2025 and initial 2026 commentary continues to sound encouraging,” said Truist Securities analyst Patrick Scholes in a note.

“All demand indicators are continuing to move in the right direction,” Weinstein said, adding that year-on-year growth in onboard spending accelerated sequentially.

(Reporting by Juveria Tabassum and Doyinsola Oladipo; Editing by Tasim Zahid)