Carnival Earnings Preview: Declining EPS, Sales Expected

Carnival Corp. (NYSE: CCL), shares of which have pulled back about two percent from a recent 52-week high, is scheduled to report its third-quarter fiscal 2012 results Tuesday, September 25 before the markets open. Investors will be looking to see whether the company can put disappointing second-quarter results and the aftermath of January's Costa Concordia wreck firmly in the rear-view mirror.

Expectations

Analysts on average predict that Carnival will report per-share earnings of $1.44 for the quarter, as well as $4.68 billion in revenue. But that would be down from the same period of last year, when the company reported a profit of $1.69 per share and $5.06 billion in revenue. The consensus earnings per share (EPS) estimate was $1.45 some 60 days ago. While Carnival topped low second-quarter EPS expectations, it posted a larger-than-expected net loss in the first quarter, and matched EPS estimates in the quarter before that.

The earnings decline in the second quarter was attributed to rising fuel costs and the effects of financial mess in Europe. But CEO Mickey Arison was upbeat about the company's global expansion plans, and the company raised its full-year earnings guidance. Carnival's share price slipped about three percent following the report.

Looking ahead to the current quarter, the consensus forecast calls for a year-over-year decline of both EPS and revenue. And so far, analysts expect full-year per-share earnings about 24 percent lower, as well as for revenue to slip almost three percent from the previous year.

The Company

Miami-based Carnival Corporation is a cruise and vacation company with more than 100 ships and about a dozen hotels and lodges worldwide. It is an S&P 500 component and it has a market capitalization of about $29 billion. It was founded in 1974, and CEO Mickey Arison is the son of Ted Arison, co-founder of Carnival.

Competitors include Royal Caribbean Cruises (NYSE: RCL), which fell short of consensus EPS estimates in the most recent quarter. When it next reports, in October, Royal Caribbean is expected to report lower earnings and revenue.

During the three months that ended in August, Carnival tested fee-based perks programs and faced a new lawsuit connected to the Costa Concordia wreck, and CEO Arison bought shares.

Performance

Carnival's long-term EPS growth forecast is more than 11 percent. The price-to-earnings (P/E) ratio and the operating margin are in line with the industry average. The company has a dividend yield of about 2.7 percent. Short interest is about 3.5 percent of the float. Of 21 analysts surveyed by Thomson/First Call who follow the stock, 10 rate the shares at Buy or Strong Buy. But note that the current share price is higher than the mean price target, a sign of where analysts expect the share price to go. A positive surprise could prompt some price target increases.

Despite the recent pullback, the stock has risen more than 12 percent in the past month. The share price is up more than 19 percent year-over-year and still well above the 50-day and 200-day moving averages. Over the past six months, the stock has outperformed Royal Caribbean and the broader markets.