Wednesday, February 1, 2023
HomeMarketCarnival Beats Earnings Estimates, but Fuel and Food Costs Soar

Carnival Beats Earnings Estimates, but Fuel and Food Costs Soar

Carnival beat earnings estimates but missed revenue estimates in its fiscal fourth quarter.

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Daniel Slim/AFP via Getty Images

Carnival
shares were rising Wednesday after the cruise operator posted a narrower loss for its fiscal fourth quarter.

However, revenue missed expectations and high costs related to food and fuel negatively impacted results.

Carnival (ticker: CCL) posted an adjusted loss of 85 cents a share on revenue of $3.84 billion, compared with the loss of $1.72 a share on revenue of $1.29 billion a year ago. Analysts surveyed by FactSet were expecting an adjusted loss of 88 cents a share on revenue of $3.91 billion.

The company said in the earnings release that booking volumes strengthened in the quarter as Covid-19 restrictions relaxed.

“The momentum has continued into December, which bodes well for 2023 overall as more markets open for cruise travel, protocols continue to relax, our closer to home itineraries play out, our stepped-up advertising efforts pay dividends and our brands continue to hone all aspects of their revenue generating activities,” Chief Executive Josh Weinstein said in the release.

Carnival also saw a jump in fuel and food costs during the quarter. Fuel costs were $580 million compared to $282 million last year. Food costs of $277 million were above the $107 million last year. Carnival said that changes in fuel price, fuel mix and currency rates unfavorably impacted the fourth quarter $267 million compared to the fourth quarter of 2019.

The company didn’t provide financial guidance for 2023. Stifel analyst Steven Wieczynski wrote in a research note that this shouldn’t come to a surprise to investors “given the uncertainty around the company’s European sourced
business and the fact the company hasn’t encountered Wave Season yet.” Wave season is a three-month period when cruise lines historically book the most cruise cabins.

Wieczynski added that booking commentary is “encouraing” and he remains “bullish around the cruise industry and Carnival for the positive long-term supply outlook that we continue to believe is being overlooked by investors at this point.”

“Combined with our continued belief in the resilience of core global cruise industry consumer demand, we encourage investors to take advantage of the current dislocation in Carnival’s share price/valuation to add to positions for the long-term,” the analyst wrote. He rates Carnival at a Buy with a price target of $18 .

Shares of Carnival jumped 3.2% Wednesday to $8.35. The stock has tumbled 58% this year.

The
S&P 500
was up 1.5% on Wednesday.

Write to Angela Palumbo at angela.palumbo@dowjones.com

Credit: marketwatch.com

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