December 20, 2018 / 2:29 PM / 3 months ago

Cruise company Carnival sees profit below estimates, shares sink 10 percent

(Reuters) - Carnival Corp (CCL.N) forecast current-quarter profit below analysts’ estimates on Thursday, as the company faces higher fuel costs, and a stronger dollar that has crimped demand for cruises, sending its shares down 10 percent to a two-year low.

The company said it expects adjusted profit of 40 cents to 44 cents per share for the first quarter, while analysts were expecting 45 cents. Carnival said it would take a hit of 3 cents per share due to the stronger dollar and higher fuel costs.

Fuel constitutes a large part of cruise operators’ operating costs, accounting for about 15 percent of Carnival’s total operating expense in its latest fiscal year.

Some analysts also cited company specific problems, especially the composition of its fleet.

“Carnival has a large fleet of legacy ships. They don’t perform as well as newer ships. It is hurting (the company) compared to Royal and Norwegian,” said Tigress Financial Partners analyst Ivan Feinseth.

Miami-based Carnival is refreshing its fleet of over than 100 ships and will add 18 new ships between 2018 and 2022, to replace some of its older, less efficient ships.

Carnival said net revenue yields, a keenly watched metric that measures spending per available berth, would be flat in the first quarter from a year earlier. Yields rose 3.7 percent in constant currency in its latest quarter.

The company also forecast full-year net revenue yields to rise 1 percent, which would be the slowest growth since 2015.

The dour forecast Carnival, a bellwether for the cruise industry, also dragged down rivals’ shares. Royal Caribbean Cruises (RCL.N) and Norwegian Cruise Line (NCLH.N) were down about 3 percent.

Carnival’s outlook overshadowed better-than-expected fourth quarter results, that was helped by higher on-board spending and ticket prices.

Carnival’s adjusted earnings were 70 cents per share, beating analysts’ estimate of 69 cents.

Net revenue climbed 4.6 percent to $4.46 billion, above estimate of $4.44 billion, according to IBES data from Refinitiv.

Shares of the company, which have fallen 17 percent this year, were down at $49.38 in afternoon trading.

Reporting by Soundarya J in Bengaluru; Editing by Maju Samuel

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