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business newsCarnival Cruises Through Recession
By
Scott Reeves Mar 24, 2009 2:20 pm
Brief scrutiny of today's headlines.
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The cruise-line operator says first-quarter profit increased 10% on lower fuel costs and higher bookings.
The company lucked into lower fuel costs as the slump in worldwide demand cut the price. A barrel of oil recently fetched $52.94 on the New York Mercantile Exchange, down from $147.27 last July - a decline of about 64%.
But Carnival needed more than funny hats to attract customers during a recession. The buccaneering souls at the cruise line did it the old fashioned way - they cut prices. This meant first-quarter net revenue fell to $2.9 billion from $3.2 billion in the same period a year ago.
But bookings for the remainder of the year are about 10% higher, and the company cites “significantly lower prices” as the key factor in getting recession-hammered customers to open their wallets. You can’t say these guys are navigating without a compass.
Carnival looks for second-quarter earnings of $0.30 to $0.32 a share. That’s down from the $0.49 earned a year ago, but in line with Wall Street estimates. You can bet the company is scrunching operating expenses wherever possible.
For the year, Carnival expects to earn $2.10 to $2.30 a share, down from its previous forecast of $2.25 to $2.75 a share.
The company is betting on a turnaround in the future, and has 16 ships valued at about $9 billion under construction and scheduled to be delivered through 2012. Most of the cost will be covered by cash from current operations.
That’s not hocus-pocus or accounting hanky-panky on the high seas - although a horizontal variation of the latter might be just the thing for discombobulated portfolios.
No positions in stocks mentioned.
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