Carnival Cuts Outlook on Higher Oil Prices

MIAMI ( TheStreet) -- Carnival ( CCL) shares fell amid heavy trading Friday after the cruise ship operator said higher oil prices will pressure full-year earnings.

Carnival also preannounced disappointing fiscal first-quarter profit results.

Carnival Cruise
Carnival Cruise Line vessels Sensation and Ecstasy

Analysts from Deutsche Bank maintained a buy rating on Carnival following the announcement, but lowered the price target on the stock by $1 to $50.

Carnival, which recently announced a 150% spike to its quarterly cash dividend , lowered its 2011 guidance by 40 cents a share due to the recent spike in oil prices .

The Miami company now expects to earn between $2.50 and $2.60 a share this year, compared with prior guidance for earnings of $2.90 to $3.10 a share. Analysts' consensus had been for Carnival to earn $2.94 a share this fiscal year.

Carnival earned $2.47 a share in fiscal 2010.

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Carnival said its adjusted earnings in the quarter ended Feb. 28 were 12 cents a share, lower than the 18 cents analysts had expected. Results included a 10-cent favorable impact, attributed to "unusual items," though no explanation of those items was given.

The operator of its namesake cruise ships, as well as Princess Cruises, Costa Cruises and Holland America Line, among others, said it will report full details of its quarterly results and 2011 full-year guidance on March 22, its regularly scheduled earnings release date.

Carnival shares fell 1% to $40.04 on Friday amid heavier-than-normal volume. Nearly 7 million shares were in play just over two hours into the trading session, compared with their average daily volume of 4.1 million. American depositary receipts of Carnival's ( CUK) London's based arm also lost 1%, trading around $41.83, while volume on that equity was also higher than normal amounting to just more than 205,000 shares.

HSBC Global Research analyst Ben O'Toole noted late last year that demand for cruises has been improving, especially in Europe, and that the operators were further helped by slow supply growth.

"We are also optimistic that costs can be controlled and that, as both operators increase in size, further efficiencies can be achieved, leading to margin expansion," he noted.

Shares of rival Royal Caribbean ( RCL) were flat at $43.39 but the stock also traded heavily.

In late January, Royal Caribbean topped Wall Street's earnings expectations for the recent quarter but the cruise ship operator forecast weaker-than-expected 2011 guidance.

Royal Caribbean booked a fourth-quarter profit that soared to $42.7 million, or 20 cents a share, from $3.4 million, or 2 cents a share, in the year-earlier quarter. Results easily beat analysts' consensus call for a profit of $26.9 million, or 13 cents a share.

Revenue came in 10.3% higher year over year to $1.6 billion, but analysts had been looking for the top-line figure to come in at $1.64 billion.

The cruise ship operator forecast 2011 earnings per share to come in between $3.25 and $3.45, and between 10 and 15 cents for the current quarter.

Wall Street had expected Royal Caribbean to book 2011 EPS of $3.31 and first-quarter EPS of 26 cents, and have since revised their estimates to $3.36 and 15 cents, respectively.

Hudson Securities analyst Robert LaFleur noted at the time that Royal Caribbean, unlike rival Carnival , hedges its fuel exposure.

Royal Caribbean said that while it does not forecast fuel prices its cost calculations are based on current at-the-pump prices net of hedging impacts. Based on those prices it included $168 million and $705 million of fuel expense in its first quarter 2011 and full year 2011 guidance, respectively.

-- Written by Miriam Marcus Reimer in New York.

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