CARNIVAL PLC - Half-year Report Carnival Corporation & plc Reports Second Quarter Earnings

[IanTHughes]

Not sure that many HYPers have included Carnival Corporation and PLC (CCL) in their portfolios, but it does figure in the recent portfolio selected by pyad on Stockopedia and being monitored/managed and reported on by myself:

https://www.investegate.co.uk/carnival- ... 4500PD0A6/

Key Highlights

- U.S. GAAP net income of $451 million, or $0.65 diluted EPS, for the second quarter of 2019, compared to U.S. GAAP net income for the second quarter of 2018 of $561 million, or $0.78 diluted EPS.
- Second quarter 2019 adjusted net income of $457 million, or $0.66 adjusted EPS, compared to adjusted net income of $489 million, or $0.68 adjusted EPS, for the second quarter of 2018.
- Adjusted net income excludes net charges of $6 million for the second quarter of 2019 and net gains of $72 million for the second quarter of 2018 relating to unrealized gains on fuel derivatives and other net gains.
- Total revenues for the second quarter of 2019 were $4.8 billion, higher than the $4.4 billion in the prior year.
- Gross cruise revenues of $4.8 billion compared to $4.3 billion for the prior year.
- In constant currency, net cruise revenues of $3.8 billion compared to $3.6 billion, an increase of 5.2 percent.
- The company expects full year 2019 adjusted earnings per share to be in the range of $4.25 to $4.35, compared to March guidance of $4.35 to $4.55, due to:

Second Quarter 2019 Results

Carnival Corporation & plc President and Chief Executive Officer Arnold Donald stated, "Second quarter earnings included revenue growth from higher capacity and improved onboard spending, more than offset by a drag from fuel and currency compared to the prior year. Second quarter adjusted earnings were better than March guidance by $0.08 per share substantially due to the timing of expenses between quarters."

So, a decrease in the expected full year earnings, ouch!


Details of the two portfolios, ReInvest and Drawdown can be found here:

PYAD HYP 2019_04 REINVEST: viewtopic.php?f=15&t=17908
PYAD HYP 2019_04 DRAWDOWN: viewtopic.php?f=15&t=17909


Ian

[Wasron]

It hasn’t gone well. Price down over 12%

Yield is now 4.5%

I hold, as I like the growth in the dividend, as well as the operating margin and debt levels.

A good global customer mix too.

Likely to be a top up for me next month

Regards

[Wizard]

It hasn’t gone well. Price down over 12%

Yield is now 4.5%

I hold, as I like the growth in the dividend, as well as the operating margin and debt levels.

A good global customer mix too.

Likely to be a top up for me next month

Regards

Do you think the dividend is going to keep growing? Do you see the fall in earnings as a one off blip?

[funduffer]

Well, if you consider the growth of the numbers of baby boomers in the western world, who are entering the 'age range' for regular cruises, then you would think that Carnival could be a growth business with good prospects over the next 20 years or so.

We have taken a couple of cruises (both Carnival brands), and I would say the average age of the clientele is somewhere in the 65-70 range, perfect for the rich baby boomers to enjoy spending their pensions.

I don't hold Carnival but would consider as a new share if the yield is adequate.

FD

[Wasron]

It’s certainly a growing industry, so it should be possible to continue growing the dividend.

https://www.maritime-executive.com/arti ... se-in-2018

I have most of the usual HYP holdings, and they often aren’t used in the same sentence as growth...so this is one of my slightly lower yielders that will hopefully drive the income growth of the portfolio overall.

Wasron

[monabri]

For any new purchases/top up it might be prudent to monitor oil prices in light of events in Iran.

Good for Shell, BP, not so good for airlines and cruise barges.


https://oilprice.com/Energy/Oil-Prices/ ... r-War.html

[Wasron]

For any new purchases/top up it might be prudent to monitor oil prices in light of events in Iran.

Good for Shell, BP, not so good for airlines and cruise barges.


https://oilprice.com/Energy/Oil-Prices/ ... r-War.html

I’ve tried to cover both bases.

I hold Shell, BP and Petrofac, so if the oil price is low they’re likely to be in line for a top up.
On the other side I have Carnival, Easyjet and DS Smith, so a high oil price can be an opportunity for a top up there.

[monabri]

This might be more serious than oil prices to Carnival (CCL).

https://apnews.com/ad20b2dc27e74cc1a50bda71c7e30042

[IanTHughes]

This might be more serious than oil prices to Carnival (CCL).

Really?

https://apnews.com/ad20b2dc27e74cc1a50bda71c7e30042

Carnival will pay $20m over pollution from its cruise ships

https://sg.finance.yahoo.com/quote/CCL. ... ow?p=CCL.L

Net income (Thousands) 3,152,000

I doubt they will notice it


Ian

[monabri]

A one-off fine of $20m is not significant (financially) but....

"The agreement also would set Sept. 13 and Oct. 9 deadlines to create an improved compliance plan and make other changes, subject to fines of $1 million per day if those deadlines are not met. If a second round of deadlines are not met, the fines could go up to $10 million a day."

"Carnival has acknowledged that in the years since its ships have committed environmental crimes such as dumping “gray water” in prohibited places such Alaska’s Glacier Bay National Park and knowingly allowing plastic to be discharged along with food waste in the Bahamas, which poses a severe threat to marine life"

"admitted falsifying compliance documents and other administrative violations such as having cleanup teams visit its ships just before scheduled inspections."

"Seitz (Judge) at an earlier hearing threatened to bar Carnival from docking at U.S. ports because of the violations and said she might hold executives individually liable for the probation violations."

The prosecuting attorney sums up

"Time and time again, Carnival has shown its contempt of environmental laws and the rule of law,” he said. “Here we are again.”

Nothing of concern here then?

[scrumpyjack]

It's going to be very expensive converting those ships to run on batteries!

[IanTHughes]

A one-off fine of $20m is not significant (financially) but....

Nothing of concern here then?

No.

Carnival Corp. reached a settlement Monday with federal prosecutors

If they had not reached a settlement, that would be a concern.


The above notwithstanding, personally I am wary of investing in a company such as Carnival Corporation & PLC (CCL) which, similar to airlines, is so dependent on a favourable oil price. Because CCL was part of the recent portfolio selected by pyad I have taken the opportunity to have a closer look and notice that Fuel costs were $1.6B in 2018 which is approximately 15% of Cruse Costs and Expenses and 10% of All Costs and Expenses. These percentages have been rising year on year between 2016 and 2018. Ok, not a full investigation I know, but I am still wary.


Ian

[PinkDalek]

Applicable exchange rate at Company Share news:

viewtopic.php?p=248989#p248989