Carnival Profit Jumps as Cruise Industry Recovers

Carnival Corp. (CCL), the world's biggest cruise group, Thursday said quarterly earnings rose 43 percent as demand drove ticket prices higher in what is typically the cruise industry's weakest season.

The operator of Cunard, Princess and 10 other lines said it also benefited from a growing fleet following its acquisition of P&O Princess Cruises (search) last year. Occupancy and advance bookings for the rest of the year are significantly ahead of year-earlier levels, it said.

The cruise industry, which hit peak levels in 1999, began to recover this year after suffering a downturn following the SARS (search) epidemic, the Sept. 11 attacks on the World Trade Center and the war in Iraq. "We believe 2005 will be the second year of a multiyear cyclical growth period for the industry," AG Edwards analyst Tim Conder wrote in a research note.

Miami-based Carnival, whose 77 cruise ships sail Caribbean, European and Pacific waters, said net profit in the fiscal fourth quarter ended Nov. 30 rose to $294 million, or 36 cents a share, from $205 million, or 26 cents a share, a year earlier.

A spate of hurricanes disrupted cruise schedules in the quarter, cutting earnings by 4 cents a share, the company said.

Still, earnings beat analysts' average forecast of 31 cents a share as compiled by Reuters Estimates.

"Demand and price are increasing as people are willing to take more cruises and to book out further now," Conder told Reuters. "And they are also really starting to discover cruises as a viable vacation alternative." He reiterated his "buy" rating on Carnival and a rival, Royal Caribbean Cruises Ltd.

Carnival's fourth-quarter prices in the Caribbean were up 15 percent to 20 percent from a year earlier, Conder said. Prices and bookings in all geographic regions will increase in 2005 and 2006, he added.

Carnival said fourth-quarter revenue rose 23.4 percent to $2.24 billion, above analysts' average estimate of $2.13 billion.

Net revenue yields, a key measure of ticket prices and occupancy that excludes travel agent commissions and air fares, rose 10.1 percent, driven by higher cruise ticket prices and onboard spending.

"Given the recovery in the industry since the Iraq war, occupancy rates for the major cruise companies are approaching physical maximums," Conder said. "The majority of future yield improvement will be driven by ticket pricing and onboard spending."

He expects growth in demand to surpass growth in capacity in 2005.

Carnival said it expects net revenue yields to increase 5 percent to 7 percent in the first quarter of 2005, and 3 percent to 5 percent for the full year. It expects capacity to increase 9 percent next year, with little change in net cruise costs from 2004.

The cruise group also said it is comfortable with analysts' full-year 2005 earnings estimate of $2.70 a share. The average estimate among analysts polled by Reuters Estimates is $2.72.

Carnival shares were up 2 percent, or $1.11, at $55.96 on the New York Stock Exchange.