Carnival misses earnings expectations, Cruise stocks fall

Carnival Corporation missed Wall Street earnings expectations for its fiscal third quarter of 2022, so cruise stocks fell Friday.

The operator of cruise lines including Carnival, Cunard, Holland America and Princess warned that they expect a net loss and decline in adjusted EBITDA earnings before interest, taxes, depreciation and amortization for the fourth quarter ending November 30 due to the seasonality of the business. EBITDA is a measure of profitability.

It expects to have its entire fleet serving guests by the end of the fourth quarter of 2022, and it anticipates that eight of its nine brands will have their entire fleet serving guests by the end of the fourth quarter of 2022.

Similar travel and leisure analyst Jim Corridore told Reuters that the forecast was a downward revision.

In 2022, the fuel costs of Carnival went up to $668 million, from $182 million in 2021. Fuel consumption was increased due to the resumption of guest cruise operations, and an increase in fuel prices of $421 per metric ton in 2022 compared to 2021, which led to an increase in fuel consumption. The spot price for fuel is $675 per metric ton.

In the same period a year ago, Carnival narrowed its second quarter net loss to $770 million, or a loss of 65 cents per share, compared to a $2.84 billion loss, or $2.50 per share. Excluding items, Carnival had a loss of 58 cents per share, well above analyst consensus for a loss of 15 cents per share, according to IBES data from Refinitiv.

Revenue went up 80% to $4.305 billion in the three months ended August 1, compared to $546 million a year ago. Revenue missed the analysts' average estimate of $4.9 billion. During the quarter, Carnival experienced higher costs related to inflation, supply chain disruptions and COVID 19 health and safety protocols.

Carnival's adjusted EBITDA for the third quarter of 2022 was over $300 million, turning positive for the first time since the company's resumption of guest cruise operations.

As we progress through the year, we are continuing to close the gap to 2019 as we build occupancy on higher capacity and lower unit costs," Josh Weinstein, Carnival CEO, said in a statement. He said that the company is focused on driving top line growth and returning to strong profitability. In the quarter, Carnival saw its occupancy increase by 15 percentage points compared to the previous quarter. As of September 30, about 95% of Carnival's capacity is serving guests.

There are more advanced advance bookings for the fourth quarter that are below the historical range and at lower prices due to future cruise credits, as opposed to 2019 sailings. Cumulative advance bookings for full year 2023 are slightly above the historical average and significantly higher prices, as compared to 2019 sailings, normalized for future cruise credits.

Carnival's shares fell approximately 20% on Friday, while Royal Caribbean and Norwegian Cruise Line have fallen more than 11% and 14%, respectively.