Carnival Forecasts Possible Quarterly Loss as Bookings Drop

Carnival Corp. (CCL), the world’s largest cruise-ship operator, forecast fourth-quarter results that trailed analysts’ estimates amid a decline in advance bookings and higher fuel prices. The shares slumped.

Fourth-quarter results excluding some items will range from a loss of 3 cents a share to profit of 3 cents, the Miami-based company said in a statement. Analysts had forecast profit of 9 cents on average, according to data compiled by Bloomberg.

Carnival has been beset by mishaps at sea, underscored in news clips this month when salvage crews off the coast of Italy righted the company’s Costa Concordia 18 months after a shipwreck that killed 32 people. An engine room fire in February crippled the Triumph. Bookings at Carnival Cruise lines for the rest of 2013 and the first half of 2014 are behind 2012’s, with prices at last year’s levels, the company said.

“When these issues happen like the Triumph or whatever, the real pressure is on the new to cruise,” Chief Executive Officer Arnold W. Donald said on a conference call with analysts. “Most of those people who have cruised extensively, they continue to cruise.”

Carnival, which operates 10 cruise brands, has estimated salvage costs at about 600 million euros ($810 million) and has said that most of it, as well as past and future claims, will be covered by insurance. The Costa Concordia removal was completed last week and the company plans take the ship to the scrap yard next spring, the company said today.

Marketing Push

Carnival, which said it plans to increase its marketing spending to boost brand perception, forecast full-year profit of $1.51 to $1.57 a share, compared with a prior view of $1.45 to $1.65. Analysts had estimated $1.55 a share, according to data compiled by Bloomberg.

“Although Carnival Cruise Line’s pricing is lower than we would like, with the new national advertising campaign and the increase in marketing spend this fall and winter we do expect to see a recovery of pricing as we cycle into the second half of 2014,” Howard Frank, chief operating officer, said on the call.

The shares fell 7.7 percent to $34.54 at the close in New York, for the biggest one-day decline since Jan. 17, 2012, the first trading day after the Costa Concordia accident. The stock is down 6.1 percent this year, compared with a 19 percent advance for the Standard & Poor’s 500 Index.

“Relatively soft first-half booking commentary and evidence of sustained booking pressure on its Carnival-branded ships will not be well received by investors,” Steven Wieczynski, an analyst at Stifel Nicolaus & Co., wrote in a note to investors. He recommends buying the shares.

Cruise Mishaps

In June, Chairman Micky Arison, the company’s largest shareholder, relinquished the role of chief executive officer, handing the duties to Donald, a director for 12 years.

Arison stepped aside after the incidents at sea led to worldwide publicity and forced the company to cut prices to fill berths. An engine-room fire on the Triumph in February left 3,100 passengers stranded at sea for days with limited food and toilet service. Separate mishaps forced at least two other Carnival ships to cancel voyages and refund fares.

The company runs about 100 ships and its brands include Princess, Holland America, Costa and Cunard, according to its website.

Carnival is taking steps to improve its service, safety and environmental record. Those include plans to spend $180 million to reduce ship emissions, as much as $700 million to improve fire protection and backup systems on ships, and an expanded refund pledge for its flagship Carnival line.

Third Quarter

Third-quarter profit excluding certain items was $1.38 a share, compared with $1.53 a year earlier, the company said. Analysts were forecasting $1.29 a share, the average of 15 estimates compiled by Bloomberg.

Sales rose 0.9 percent to $4.7 billion in the quarter ended Aug. 31, the cruise operator said, matching the $4.7 billion average of estimates. In June, Carnival predicted third-quarter profit of $1.25 to $1.33 a share.

Fuel prices increased 2.3 percent to $674 per metric ton in the third quarter, the company said.

To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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