2nd UPDATE:Carnival 2Q EPS Hurt By About 5 Cents/Share On A/H1N1 Virus
19 May 2009 - 3:48AM
Dow Jones News
Carnival Corp. (CCL) said fiscal second-quarter earnings will be
cut by about 5 cents a share from having to change cruise routes in
the wake of the A/H1N1 influenza virus centered in Mexico, an
impact perhaps less severe than some investors expected.
In addition to the 5-cent profit reduction from the changes
through June 15, Carnival said Monday up to an additional nickel a
share could be cut from full-year earnings results because of
further impact from the illness.
A Royal Caribbean Cruises Ltd. (RCL) spokeswoman said that at
this time, it does not plan on making a similar announcement about
any impact the A/H1N1 influenza virus may have on earnings.
The world's largest cruise ship operator by market share,
Carnival rose 5% recently to $26.31. Competitor Royal Caribbean's
shares also saw a lift, adding nearly 10% to $15.76.
"When the swine-flu story broke and the cruise lines modified
their itineraries, it had the potential to be a significant risk to
demand going forward," Zacks Investment Research analyst Sean P.
Smith said. "As more has been discovered about the nature of the
virus and its severity, however, those risks to short- and
long-term demand seem to have diminished."
The concern had been that the outbreak could reduce the number
of passengers or force the cruise companies to lower ticket prices
further. Either way, that could hurt passenger yields, a measure of
ticket prices and onboard spending.
Just after A/H1N1 concerns came to light in late April, UBS
estimated that it would take a 20% reduction in full-year passenger
yields for the small percentage of Mexican itineraries affected
from each operator to impact company-wide yields on an annual basis
by about 1%.
The firm estimated that, for Carnival, each 1% change in net
yields represented about 15 cents to 2009 earnings per share, while
for Royal Caribbean, each 1% change in net yields represented about
24 cents to 2009 earnings per share.
Both Carnival and Royal Caribbean steered passengers away from
Mexican ports after the U.S. Centers for Disease Control and
Prevention recommended against non-essential travel to Mexico.
That recommendation was lifted Friday, but Carnival said Monday
that some of its routes won't return to their original form until
mid-June.
Carnival said 27 ships had to change route from three of its
brands. The company said it will continue to monitor booking trends
and provide an updated guidance on its second-quarter earnings
call, scheduled for next month.
Royal Caribbean decided late Friday to resume port calls to
Cozumel, beginning with sailings that depart on or after May 24, a
spokeswoman said. Its Mariner of the Seas will continue its
modified Pacific Northwest itinerary, up to and including its June
14 sailing.
In an April 2 financial filing, Carnival projected fiscal
second-quarter earnings to be in the range of 29 cents to 31 cents
a share and lowered its full- year view to $2.04 to $2.24 from its
March forecast of $2.10 to $2.30. The quarter concludes at the end
of this month.
Royal Caribbean expects its second-quarter earnings per share to
be flat to a loss of 5 cents. It projects full-year earnings to be
around $1.35.
-By Kelly Nolan; Dow Jones Newswires; 201-938-4049;
kelly.nolan@dowjones.com
(Kevin Kingsbury contributed to this report.)