Higher fuel costs are starting to hit Carnival
As expected, Carnival reported about 9% revenue growth for the quarter. Earnings came in at $0.48, a penny above expectations. CEO Mickey Arison pointed out that North American and European revenues came in according to plan, but the Caribbean continues to be a thorn in the side of the largest cruise-line firm. Industry concerns about overcapacity and worries that hurricanes will mess with booking trends are bogging things down in that part of the world.
Last fall was surprisingly calm, resulting in smooth sailing as Carnival finished out the year. But hurricane season will indeed be here again within a couple of months, and it's always a sensitive time for cruise lines. Aware of that reality, Carnival is working to lessen its reliance on the fickle Caribbean region. It's pared back capacity there, while increasing deployments to Europe.
Unfortunately for Carnival, high oil prices are again rearing their ugly head, shaving an estimated $0.02 off second-quarter results. Higher fuel expenses also caused Carnival to lower full-year guidance to $2.85-$2.95, down from closer to $3 previously.
At best, that means 6.5% year-over-year growth, well below the 20% annual bottom-line growth Carnival has posted over the past five years. However, fellow Fool Will Frankenhoff still likes the long-term growth potential of the industry, which Carnival and archrival Royal Caribbean
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Fool contributor Ryan Fuhrmann is long shares of Carnival and Royal but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.