Image source: Carnival.

It's been smooth sailing for the leading cruise line operator in recent months. Carnival Corporation & plc (NYSE:CCL) (NYSE:CUK) posted quarterly results for its fiscal quarter ending in November this morning. Revenue topped $3.9 billion, 6% ahead of the prior year's comparable showing.

Carnival's top-line growth was fueled by a healthy uptick in gross revenue yields, a popular measuring stick in assessing cruise line performance that is made up of revenue divided by available lower berth days. Gross revenue yields rose 1.6% since the prior year, or up a more impressive 4.1% on a constant currency basis. Carnival was only forecasting a 3% increase on a constant currency basis three months earlier. The cruising giant got to its revenue number through a 6% increase in passenger tickets (fares account for 73% of total revenue) and a 5% uptick in what folks spent once they were aboard. 

The bottom line was even stronger. Earnings more than doubled to $609 million or $0.83 a share, but that reported figure includes unrealized gains and losses on fuel derivatives and other items. Back those out and adjusted net income still rose 26% to $491 million or $0.67 a share. Gross cruise costs held steady, and changes in fuel prices and currency exchange rates ate into $0.04 a share of earnings -- but not enough to prevent encouraging double-digit percentage growth.  

Catching a wave

Sentiment has improved for the industry lately. Shares of Carnival and rival Royal Caribbean (NYSE:RCL) bottomed out during the early summer, and analysts warned of problematic booking trends as the season played out.

Carnival and Royal Caribbean are faring much better these days. Royal Caribbean stock is trading 27% higher since its summertime lows, but it's still trading lower year to date. Carnival shares have climbed 22% higher since their early July bottom, but at least Carnival stock is now higher for all of 2016.

It was a notable quarter for Carnival. Carnival Vista became the latest ship to join the growing fleet, and during the quarter Carnival signed a deal for three cruise ships that will be powered by liquefied natural gas (it now has seven ships on order that will run the cleaner fuel). Carnival also made a shrewd programming move, launching Saturday morning TV shows on ABC, NBC, and the CW. The family friendly programs showcase Carnival's 10 cruise brands, highlighting global destinations accessible through ocean travel. It's a neat way to groom the youngest generation of potential cruise travelers. 

Carnival is making the most of its cash-generating prowess. It hiked its quarterly dividend earlier this year, now shelling out $1 billion in distributions over the course of the year. It also invested $2.3 billion in share buybacks through fiscal 2016, a move that naturally increases profitability on a per-share basis. 

Its outlook for 2017 calls for slowing revenue yields. The midpoint of the $3.30 to $3.60 that it's targeting in adjusted earnings per share for the year is exactly what it earned in fiscal 2016. An expected spike in fuel prices -- a major cost component for cruise lines -- is holding bottom-line growth in check. 

The prognosis is still encouraging. Bookings are holding up as folks gravitate to cruise ships as travel options. Changes in Cuba should drum up interest in Caribbean sailings, and as long as the global economy doesn't fall apart demand for Carnival's vessel sailings should remain strong. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.