Here’s How Carnival Beat Earnings Expectations

Carnival Corporation (NYSE:CCL) owns a portfolio of cruise brands and is a provider of cruises to a variety of vacation destinations.  CCL’s cruise brands include, among others, Carnival Cruise Lines, Princess Cruises, Costa Cruises, Holland America Line, P&O Cruises and AIDA Cruises.  In addition to the cruise operations, CCL also owns Holland America Tours and Princess Tours, tour operations based in Alaska and the Yukon Territory.

CCL sports a $28.1 billion market cap and a 0.86% dividend.

Earnings: 4Q profit of $248 million ($0.31/share) vs. 4Q09 profit of $193 million ($0.24/share).  The most recent Q included a one-time charge of $0.07/share resulting from an on-board fire that disabled a cruse ship.

Revenue: Up 6.6% YoY to $3.5 billion.

Actual vs. Wall St. Expectations: CCL beat September EPS guidance of $0.25-$0.29/share (after adjusting for the above-mentioned $0.07/share charge) and came in ahead of analysts in terms of revenue, exceeding expectations of $3.36 billion.

Notable Stats: 1Q11 EPS projections of $0.15-$0.19/share fell short of analyst’s $0.24/share estimate.

Nonetheless, FY11 EPS guidance of $2.90-$3.10/share came in well ahead of analyst’s $2.92/share estimate.

Net revenue yields are expected to continue to improve, having increased from 3% to 4% last Q.

Net cruise costs, i.e. costs excluding fuel expenses, voyage disruptions and currency impacts, declined 1.1%.

Fuel prices rose 6%, slightly ahead of expectations.

Did You Hear That? Management noted during the conference call that, “booking trends have continued to improve for both our North American and European brands, particularly for our peak summer season.  We are optimistic these positive trends are an indicator of a strong wave season, our heaviest booking period which begins in early January.  Given the recent cold weather and snow, particularly in the Northern U.S. and Europe, there is no better time to book a cruise vacation.”

Competitors To Watch: Royal Caribbean (NYSE:RCL), Ambassadors Intl. (NASDAQ:AMIED).

Technicals: CCL recently broke out of a textbook cup-with-handle pattern.  The pattern began during late-April/early-May, then, early last month, shares finally approached new highs.  After briefly trading above the upper-end of their old range, shares dipped down and spent the next month forming a typical handle.  Then, finally, following last week’s earnings report, share broke upward to new highs, completing the breakout.  CCL’s 10-week moving average is trading above its 40-week line and both are upward sloping.  The cup-with-handle breakout is indicative of a new leg higher, the $45-range should act as support.

Commentary: Both the cruise industry and the broader travel sector have seen demand improve across the board this year despite a tepid economy and high unemployment.  Indeed, CCL posted its first rise in revenue yields since late-2008.  While current-Q guidance was weak, strong FY11 guidance indicates that CCL may have a few more quarterly beats in its pocket, and thus potentially more room to run.

Disclosure: No holdings in CCL.