Carnival (NYSE:CCL) in late December issued earnings results that pleased most investors. The cruise ship giant's growth and earnings both beat expectations despite some unusual challenges that affected vacation demand and harmed its profit profile.

In a conference call with Wall Street analysts, CEO Arnold Donald and his team broke down that result while providing detail on Carnival's outlook for fiscal 2020. Below are a few highlights from that presentation.

An older couple smiling in front of a cruise ship

Image source: Getty Images.

Ending an impressive streak

After five years of very strong adjusted earnings growth for our company, 2019 brought with it more than our fair share of challenges. -- Donald

Carnival outperformed management's earnings target for the fiscal fourth quarter, but the 3% increase for the full year was far below the double-digit growth shareholders saw in each of the prior five fiscal years. Several challenges contributed to that slowdown, including a devastating hurricane in the Caribbean and the surprise removal of Cuba as a vacation destination for U.S. tourists.

Yet the biggest drag was spotty economic conditions in southern Europe and Germany, which reduced demand for longer, more expensive cruises. "Without this downturn," Donald said, "we would have achieved double-digit adjusted EPS growth" for a sixth consecutive year.

Happier guests are the key

On the guest experience side, we continue to deliver [and] both our guest experience scores and our net promoter scores are toward the top end of prior ranges, with many hitting new highs. -- Donald

Cruise satisfaction, the foundation of Carnival's long-term growth rate, continues to trend higher as guests respond to new ship launches, vessel upgrades, and private resort destinations like the six resorts Carnival has operating in the Caribbean today.

These successes are currently being masked by the temporary issue of cruise credits that the company issued in response to the hurricane season and the close-in cancelation of Cuba as a destination. Without these challenges, average pricing would be growing more quickly and supporting higher net revenue yields, which declined slightly in fiscal 2019.

More challenges ahead

We are entering fiscal year 2020 with a record booked occupancy position. -- CFO David Bernstein

Carnival is as optimistic as ever about its long-term growth opportunities and its ability to consistently generate double-digit adjusted earnings growth. Yet the fiscal year ahead is likely to come up short on both targets for essentially the same reasons that investors saw a tough 2019 for the business. The company sees economic challenges in Europe pressuring global results even as strong pricing lifts earnings in key markets like Alaska and the Caribbean.

Management described the challenge as simply a part of running a consumer discretionary business that demands long-term capacity investments. "We build 30-year assets and we make decisions many years in advance," Donald said, "fully aware that we can't time the economic cycle that we deliver them into."

That said, Carnival is busy directing much of robust 2019 cash flow toward investments that should support growth well into the 2020s. The company is also targeting a seventh consecutive year of record sales and earnings, even if the pace of those gains will likely trail the level shareholders enjoyed in the years leading up to 2019.

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