Carnival Narrows Annual Loss Forecast and Reports Third-Quarter Profit, Shares Dip on Fuel Cost Concerns

Cruise operator Carnival has announced that it has narrowed its annual loss forecast and achieved a third-quarter profit, driven by higher ticket prices and strong demand. However, concerns over steep fuel costs have led to a 7% drop in the company’s shares. Despite this setback, industry rivals Norwegian Cruise Lines and Royal Caribbean have managed to increase ticket prices while remaining more affordable than hotels, attracting younger travelers who are eager to indulge in experiences rather than expensive discretionary purchases.

Morningstar research analyst Jaime Katz believes that fears surrounding inflation, reduced consumer savings, student loan repayments, and other spending issues are temporary and should not overshadow the positive trend of cruising’s popularity among consumers. Katz stated, “All signals indicate cruising is resonating with consumers.”

While Carnival’s annual outlook has been somewhat overshadowed by a wider-than-expected loss forecast for the fourth quarter, the company remains optimistic. It anticipates a net impact of $130 million due to higher fuel prices and unfavorable currency exchange rates. Unlike its competitors, Carnival does not hedge against oil price volatility. However, the company is actively investing in energy-saving technologies and optimizing itineraries to reduce fuel consumption. Additionally, maintenance and repair work in 2024 will contribute to increased costs, with an 18% rise in dry dock days.

Cruise operators have experienced a surge in travel demand following the pandemic, with travelers seeking attractive vacation deals. Redburn Atlantic analyst Alex Brignall highlights that cruise pricing is currently 35% to 40% cheaper than leisure hotels. Carnival reported record-high quarterly revenue, with over 2.5 million guests embarking on their maiden cruise this year. First-time cruisers surged to 170% of the previous year’s levels in the reported quarter, leading to a return to pre-pandemic occupancy levels.

CEO Joshua Weinstein expressed confidence in the company’s future, stating that the booked position is the strongest it has ever been. However, he anticipates a potential decrease in booking volumes for 2024 as inventory becomes saturated.

In the third quarter, Carnival achieved a profit of $1.07 billion, or 79 cents per share, compared to a loss of $770 million, or 65 cents per share, in the same period last year. The company remains committed to navigating the challenges posed by fuel costs and is focused on providing exceptional cruise experiences for its customers.