Carnival Profit Drops 93%

Carnival Corp.'s (CCL) fiscal second-quarter earnings dropped 93% as the cruise-line operator recorded unrealized losses from fuel derivatives.

Adjusted profit comfortably beat the company's March estimates, which were well below expectations at the time.

Carnival raised its full-year earnings guidance, citing anticipated cost reductions and lower fuel prices. Based on current booking trends, the company expects full-year earnings of $1.80 to $1.90 a share, up from its formerly reduced estimate of $1.40 to $1.70 a share. Carnival also forecast current-quarter earnings of $1.42 to $1.46 a share, compared with the estimate of $1.44 a share from analysts surveyed by Thomson Reuters.

The world's largest cruise operator--which runs lines such as Holland America, Cunard and its namesake--had seen increased revenue for the last two years as demand in the cruise industry and broader travel sector grows despite a sluggish economy and worries about unemployment.

However, the company was hit by a wave of negative publicity following the Costa Concordia shipwreck in January. The Concordia foundered after striking a rock off the coast of Italy, causing the death of at least 25 people. The operator of the vessel, Costa Crociere SpA, is a unit of Carnival. A few weeks later, the cruise line took another public-relations hit when its Allegra ship experienced an engine-room fire while sailing in the Indian Ocean, leaving passengers without power or running water.

For the quarter ended May 31, Carnival reported a profit of $14 million, or two cents a share, down from $206 million, or 26 cents, a year earlier. The most-recent quarter included $145 million of unrealized losses on fuel derivatives. Adjusted earnings came in at 20 cents a share. In March, Carnival had forecast earnings for the quarter at between five and nine cents a share.

Revenue fell 2.3% to $3.54 billion. Analysts polled by Thomson Reuters recently forecast revenue of $3.55 billion.

Operating margin fell to 7.2% from 7.7%.

Net cruise costs, including fuel, fell 3.6% and were 2.2% lower, excluding fuel. Fuel prices climbed 12% from the year-ago quarter.

Advance bookings, excluding Costa, for the remainder of the year are priced lower with lower occupancies versus last year.

Shares were up 13 cents to $34.45 in recent trading. The stock is up 8% in the last three months.

Write to Saabira Chaudhuri at [e-mail]