Carnival 2Q profit up almost 3 percent

Carnival Corp., the world's largest cruise group, reported a nearly 3 percent rise in second-quarter earnings Tuesday, overcoming weak pricing in the Caribbean and higher fuel costs with a strong performance in Europe.

The company lowered its full-year earnings guidance because of those fuel costs, but said that Caribbean bookings were improving.

Miami-based Carnival reported net income of $390 million, or 48 cents per share, for the quarter ended May 31, versus $380 million, or 46 cents per share, a year earlier. Revenue rose to $2.9 billion from $2.66 billion.

Analysts surveyed by Thomson Financial were looking for a profit of 47 cents per share on sales of $2.88 billion, on average.

The cruise operator had given guidance of between 45 cents per share and 47 cents per share for its second quarter earnings.

Micky Arison, Carnival chairman and chief executive, said revenue from North American and European cruises fell in line with company expectations.

"The Caribbean, which still had a relatively high percentage of our capacity during the second quarter, continued to experience price pressure," Arison said. "However, increases in revenue yields from our European brands together with the strengthening euro and sterling produced significant revenue yield growth outside of North America."

The higher fuel costs affected earnings by approximately 2 cents per share, Arison said.

Shares of Carnival rose 29 cents to $49.95 in midday trading.

Carnival and the rest of the cruise industry have seen sluggish demand and weak pricing in the Caribbean over the past two years. In response, Carnival and competitor Royal Caribbean Cruises Ltd. are shifting capacity to Europe to take advantage of strong demand.

Currently, Carnival's North American cruises represent about 69 percent of capacity, with that number expected to drop to about 62 percent in 2010, said Howard Frank, vice chairman and chief operating officer.

For the second quarter, net revenue yields edged up 0.2 percent compared with the prior year. Adjusting for currency exchange rates, net revenue yields fell 2.6 percent when compared with the previous year. Yields are a key profitability gauge that measure net income earned from passengers per day from cruise tickets and onboard sales.

Looking ahead, Carnival said advance bookings for the second half of 2007 were better than last year's, though prices were down slightly. Since Jan. 1, bookings for Carnival Cruise Lines, which sails mostly in the Caribbean, were up about 18 percent over last year, compared to a 5.5 percent capacity increase for the full year.

However, high fuel prices have reduced earnings estimates by approximately 12 cents per share for the full year. The company expects full year 2007 earnings per share to be in a range of $2.85 to $2.95, compared with $2.77 in 2006. The company previously had said it expected 2007 earnings to be in the range of $2.90 to $3.10 per share.

Carnival operates 82 ships, with 17 new ships scheduled to enter service by June 2011. Carnival said Monday its Cunard Line was selling the Queen Elizabeth 2, which is expected to leave the fleet in November 2008.

The company also said it expects joint ventures with tour providers Iberojet in Spain and TUI in Germany to be completed in the second half of the year.