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Carnival Pairs Another Beat With a Modest 2019 Outlook

By Demitri Kalogeropoulos - Dec 21, 2018 at 3:30PM

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The cruise giant notched a record year and predicted another, slower, uptick ahead.

Carnival (CCL 12.44%) just closed the books on a strong fiscal year that saw the cruise giant speed up its sales gains and surpass many of management's financial and operating targets. In fact, the company blew past its core growth forecast for the third straight quarter.

Yet investors, choosing to focus instead on a predicted demand slowdown next year, sent the stock lower despite that success.

More on that 2019 outlook in a moment. First, here's a closer look at Carnival's fourth-quarter performance.


Q4 2018

Q4 2017

Change (YOY)


$4.46 billion

$4.26 billion


Net income

$494 million

$546 million


Earnings per share




Data source: Carnival's financial filings. YOY = year over year.

What happened this quarter?

Sales gains again exceeded the top end of the guidance range that CEO Arnold Donald and his executive team issued in late September. The company's cruise expenses were slightly higher than expected, but still translated into robust operating profit. Reported earnings fell, though, due to higher fuel costs.

A cruise ship out at sea.

Image source: Getty Images.

Highlights of the quarter include:

  • Net revenue yields, a core industry growth metric, improved by 3.7% to outpace the range of 1.5%-2.5% that management had set. The company handled about the same number of passengers (3 million) and achieved better occupancy levels and improved spending on onboard services.
  • Gross cruise costs dropped by less than 1% while the company had been targeting a decline of between 1% and 2%.
  • Higher fuel costs reduced net income and removed roughly $0.13 from per-share earnings, management estimated.
  • The sales gains led to growth of 3.8% for the full year after accounting for currency exchange shifts, compared to the 2.5% boost that executives initially predicted a year ago.

What management had to say

Donald highlighted a few of the bigger-picture financial and operational wins the company achieved in fiscal 2018. "We grew net cruise revenue over five percent," he said in a press release, "achieving the highest revenue yields in our company's history, and producing double-digit adjusted earnings growth despite a significant drag from fuel and currency." Management said they were particularly happy with Carnival's efficiency gains. "I thank our 120,000 team members who encountered multiple headwinds and still delivered ... a more a than doubling of return on invested capital in five years," Donald noted. That key financial metric crossed into the double digits this year from below 5% in 2013.

Looking forward

Carnival is predicting another year of record sales and profits in 2019. However, the gains might be some of the slowest that investors have seen in a few years. Net revenue yields should inch up by about 1%, the company forecast, compared to 4% in the year that just ended and 3% in fiscal 2017.

A greater share of Carnival's available vacation inventory has been booked for the year ahead than normal. That implies that demand for its cruises remains strong into the new year. However, that fact also makes it less likely that the company will significantly outpace its modest growth forecast (like it did in 2018).

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