23 Dec

Why Did Carnival’s Profits Rise despite a Fall in Revenue?

WRITTEN BY Ally Schmidt FEATURED IN Post-Release Earnings Reports

Earnings review

Carnival’s (CCL) 4Q15 financial report came better than most had expected. Despite a fall in revenue, CCL saw a strong surge in its earnings as they grew by a whopping 87% year-over-year. The company’s bottom line rose from $208 million last year to $389 million at the end of the last quarter of this year. The earnings per share also grew in line at 85% year-over-year, going from $0.27 per share to $0.50 per share during the same period.

Why Did Carnival’s Profits Rise despite a Fall in Revenue?

In our earnings preview, we pointed out that CCL may beat analyst estimates in this quarter. See “Will Carnival Continue to Beat Wall Street Estimates in 4Q15?” for the complete series.

Positives

Carnival has been benefiting from lower oil prices as fuel expenses form a major expense factor for it. Oil prices have seen a major fall since July last year and have resulted in huge savings for major travel companies.

In the recent quarter, the gross cruise costs for Carnival, including fuel, fell 10.7% year-over-year on a current dollar basis. The company saw a steep 46% year-over-year fall in its fuel prices as they reached $316.

Outlook

For the upcoming first quarter of 2016, the company expects its adjusted earnings to stand within the range of $0.28 to $0.32 per share. However, the company’s performance could be affected by the fluctuations in the dollar, continued weak oil prices, and other economic factors such as employment. For fiscal 2016, the company expects its earnings to fall in the range of $3.10 to $3.40.

Carnival’s (CCL) competitors include Royal Caribbean Cruises (RCL) and Norwegian Cruise Line (NCLH). CCL forms 4.0% of the WBI Large Cap Tactical Yield Shares (WBIG) and 4.0% of the WBI Large Cap Tactical Select Shares ETF (WBIL).

Next, let’s look at CCL’s performance across key metrics.

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