Carnival Corporation & plc announced U.S. GAAP net income for the full year 2016 of $2.8 billion, or $3.72 diluted EPS, compared to $1.8 billion, or $2.26 diluted EPS, for the prior year.
Full year 2016 adjusted net income of $2.6 billion, or $3.45 adjusted EPS, was higher than adjusted net income of $2.1 billion, or $2.70 adjusted EPS, for the full year 2015. Adjusted net income excludes unrealized gains and losses on fuel derivatives and other items, totaling $199 million in gains for the full year 2016 and $349 million of losses for the full year 2015. Revenues for the full year 2016 were $16.4 billion, $0.7 billion higher than the $15.7 billion in the prior year.
Carnival Corporation & plc President and Chief Executive Officer Arnold Donald noted, “We achieved the most profitable year in our company’s history as well as record fourth quarter earnings. The continued execution of our core strategy to drive consumer demand in excess of measured capacity growth, contain costs and leverage our industry-leading scale resulted in our third consecutive year of significantly higher earnings and return on invested capital. The delivery of over $5 billion in cash from operations for our shareholders enabled increased dividend distributions reaching $1 billion and the investment of over $2.3 billion in the repurchase of Carnival Corporation stock. This continued strong performance is a credit to the outstanding contributions of our 120,000 employees worldwide who work every day to exceed our guests’ expectations and our thousands of travel agent partners around the globe whose support is crucial to our success.”
Key information for the fourth quarter 2016 compared to the prior year:
• U.S. GAAP net income for 4Q 2016 of $609 million, or $0.83 diluted EPS, compared to $270 million, or $0.35 diluted EPS, for the prior year. On an adjusted basis, 4Q 2016 net income of $491 million, or $0.67 EPS, was higher than net income of $389 million, or $0.50 EPS, for the prior year. Adjusted net income excludes unrealized gains and losses on fuel derivatives and other items, totaling $118 million in gains for the 4Q 2016 and $119 million of losses for 4Q 2015.
• Gross revenue yields (revenue per available lower berth day or “ALBD”) increased 1.6 percent. In constant currency, net revenue yields increased 4.1 percent for 4Q 2016, better than September guidance of up approximately 3 percent.
• Gross cruise costs including fuel per ALBD increased 0.2 percent. In constant currency, net cruise costs excluding fuel per ALBD increased 1.0 percent, in line with September guidance of up approximately 1 percent.
• Changes in fuel prices (including realized fuel derivative losses) and currency exchange rates decreased earnings by $0.04 per share versus the prior year.
Highlights during the fourth quarter included the U.S. debut of Carnival Cruise Line’s Carnival Vista, featuring a concert for Operation Homefront military families by country music superstar Carrie Underwood and the ship’s naming ceremony with godmother Deshauna Barber, the first woman serving in the U.S. military to hold the Miss USA title. Holland America’s Koningsdam also made its North American debut in November while Seabourn took delivery of Seabourn Encore, setting new standards for ultra-luxury cruising.
During the quarter, Carnival Corporation also signed a memorandum of agreement with Meyer Werft for three new 180,000-ton cruise ships that will be powered by liquefied natural gas, the world’s cleanest burning fossil fuel. Two of the ships are for Carnival Cruise Line and are scheduled for delivery in 2020 and 2022. The third ship is designated for P&O Cruises (UK) and is scheduled for delivery in 2020. The company also signed an agreement with Shell to begin fueling its LNG-powered ships, starting with AIDA and Costa ships scheduled to launch in 2019.
Three new original TV series created by Carnival Corporation began airing on Saturday mornings in October on ABC, NBC and the CW in the U.S. The shows are designed to showcase all 10 of the company’s cruise brands while highlighting ocean travel as a means to experience global destinations and learn about the world and other cultures.
At this time, cumulative advance bookings for the first three quarters of 2017 are well ahead of the prior year at considerably higher prices. Since September, both booking volumes and prices for the first three quarters of 2017 have been running well ahead of the prior year.
Donald commented, “We enjoyed strong momentum in booking patterns throughout 2016 and therefore are in a stronger booked position entering the new year at higher prices as a result of our ongoing efforts to increase consideration and demand for our brands.”
Based on current booking trends, the company expects full year 2017 net revenue yields in constant currency to be up approximately 2.5 percent compared to the prior year. The company expects full year net cruise costs excluding fuel per ALBD in constant currency to be up approximately 1.0 percent compared to the prior year.
As a result of higher fuel prices, forecasted fuel costs for the full year 2017 are expected to increase approximately $200 million (fuel price impact only) compared to the prior year, net of realized fuel derivatives, reducing earnings by $0.27 per share. In addition, unfavorable movements in currency exchange rates are forecasted to reduce earnings by a further $0.16 per share.
Taking the above factors into consideration, the company expects full year 2017 adjusted earnings per share to be in the range of $3.30 to $3.60, compared to 2016 adjusted earnings per share of $3.45.
Donald added, “We are anticipating another solid year of operational improvement in 2017. Despite the unusual and significant impact of fuel and currency working against us simultaneously, the underlying strength in our fundamental business leaves us well positioned to achieve sustained double digit return on invested capital and to create continued value for our shareholders.”
First Quarter 2017 Outlook
First quarter constant currency net revenue yields are expected to be up approximately 1.5 to 2.5 percent compared to the prior year. Net cruise costs excluding fuel per ALBD in constant currency for the first quarter of 2017 are expected to be higher by approximately 1.5 to 2.5 percent compared to the prior year. Changes in fuel prices (including realized fuel derivatives) and changes in currency exchange rates compared to prior year are expected to decrease earnings by $0.13 per share. Based on the above factors, the company expects adjusted earnings per share for the first quarter 2017 to be in the range of $0.31 to $0.35 versus 2016 adjusted earnings per share of $0.39.
Selected Key Forecast Metrics
Full Year 2017 First Quarter 2017
Year over year change: Current
Net revenue yields Approx flat Approx 2.5% (1.5) to (0.5)% 1.5 to 2.5%
Net cruise costs excl. fuel / ALBD Approx (1.5)% Approx 1.0% (0.5) to 0.5% 1.5 to 2.5%
Full Year 2017 First Quarter 2017
Fuel price per metric ton $374 $356
Fuel consumption (metric tons in thousands) 3,290 820
Currency: Euro $1.04 to €1 $1.04 to €1
Sterling $1.24 to £1 $1.24 to £1
Australian dollar $0.73 to A$1 $0.73 to A$1