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In preparation for CCL's 2Q 2011 earnings release tomorrow, we’ve put together the pertinent forward looking company updates since its 1Q 2011 earnings call and as well as an 1Q 2011 earnings call YOUTUBE.




  • “Prolonged conflicts in the Middle East and North Africa region, as well as the earthquake and nuclear disaster in Japan, which combined resulted in over 300 deployment changes, will cost the company an additional $0.15 per share (previously forecasted cost disruption of $0.05 per share) for the second half of 2011.” 
  • “Increases in fuel prices net of currency exchange rates will cost the company approximately $0.05 per share in the second half of the year. “ 
  • “The company has also experienced softness in bookings for the Southern Europe and UK markets, which will result in reduced revenues costing an additional $0.05 per share for the second half of 2011. However, the company expects to offset the effect of this $0.05 per share in other cost areas of the business. Revenue performance for the North American brands remains strong and the company continues to expect sequential improvement in the second half of the year.” 







  • “A 10% change in the price of fuel for the remaining three quarters of 2011 represents a $0.22 per share impact. With respect to FX movement, a 10% change in all currencies relative to the U.S. dollar for the – also, for the remaining three quarters of 2011, would also impact our P&L by $0.22 per share.”
  • “On a fleetwide basis, occupancies are slightly lower than a year ago on a 5% increase in cruise capacity for the next three quarters. Ticket pricing for these bookings are nicely higher than last year. Looking at this picture by major markets, North American occupancy is slightly behind last year, with nicely higher pricing. Bookings for Europe, Asia, Australia, or EAA, are also slightly behind last year at higher prices.”
  • “On a fleet-wide basis, bookings have been running higher year-over-year at higher prices. In North America, wave bookings have paced the increased North America capacity with solid increases in year-over-year pricing.
  • In EAA, bookings have also been higher during this wave period, at approximately the same year-over-year prices. But the booking pace has lagged the 8.6% capacity increase for the period.”
    • “The EAA brands in particular, Costa and Ibero Cruises, have felt the effects of the political unrest in the Middle East and North Africa and the related disruptions to their itineraries, which visited these countries….The reaction of the North American brands have been more muted and they have a lot less calls in those countries, as well.”
    • “As far as pricing for the summer, yes, I think because we’ve been able to achieve higher prices, we have been holding out for those higher prices, and that’s why you’re seeing a little bit lower occupancies to compensate for those higher prices. But that’s versus last year. We’ve obviously filled last year and the feeling is that we can hold out for the prices and still fill this year.”
    • “For 2011, we expect to have free cash flow of about $1 billion and, given that we raised the dividend in January, the dividend in this year would be $700 million. So there isn’t that much significant extra cash flow this year, only $300 million.”
    • “Demand in North America has been pretty solid since wave season, both for European cruises, Alaska cruises and other kinds of itineraries. So demand seems to be pretty solid. I would say if you could – if you look at it from premium brands versus contemporary brands, we’re seeing I think pretty good strength in those premium brands, where for longer cruises, European programs, Alaska programs and for Caribbean programs, it’s good. But I think that we’ll see a lot of the yield improvement that we’re expecting to come from most of those areas where we’ve received good historical demand for those types of cruises from the North American market.”
    • “And we also reevaluated our income taxes. We had a pretty substantial increase in our income tax expense from 2010 to 2011 in our December guidance. And now that we’ve got a little bit more experience during the first quarter and have a better picture of the year, we just reevaluated that. We took it down, but we still are up versus the prior year in terms of income taxes. So all of that, as I said before, kind of offset some of the inflationary pressures in cruise costs.”
    • “I think Alaska, based on the agreements we reached with the Governor last year, lower head taxes and much higher marketing spend by the Alaska – the State of Alaska, has really helped, plus obviously, capacity is down versus the peak. So the combination of those things, I think, really helped Alaska.”
    • “On the Caribbean side, I mean, typically there is lot less Caribbean capacity in the summer and so – and we have a little bit less. So I mean, I think Caribbean pricing is holding up a lot better.”
    • [Net cruise costs] “And one of the reasons why the second quarter is a bit higher is because they’re projecting perhaps some more advertising expense over and above last year….We were expecting the third quarter to be up and the fourth quarter to be down and that’s how we got to flat to up 1% for the year.”
    • “Onboard spend is up across the board in all the brands, really hasn’t been significant changes in the different marketplaces. By category, most of the categories are up. We’re still struggling a little bit in the casino and art, which is something  we’ve talked about over the last couple of years. But all the brands are up and I don’t – there aren’t any discernible differences by brand or by region.”

2Q 2011

  • "Fleet-wide capacity in the second quarter of 2011 will be 5% higher, 2.9% in North America brands and 8.6% for EAA brands. On a fleet-wide basis, occupancies are at approximately the same levels as last year and local currency pricing is higher. than a year ago. At this juncture, we have only a small amount of inventories left to sell in the second quarter. North American brands are 55% in the Caribbean, with the balance in various other itineraries. Currently, pricing for North American brands in the second quarter is higher than a year ago, with occupancies at the same levels."
  • “Caribbean pricing has shown improvement from the first quarter and is down only slightly from last year’s second quarter Caribbean prices. Pricing for the various other North American brand itineraries, including shoulder Alaska and Europe seasons and most other itineraries, is higher than a year ago. For EAA brands, they are 54% in European itineraries, up slightly from a year ago, with the balance in various other itineraries. Local currency ticket pricing for EAA brand cruises in Europe is slightly higher than a year ago. Pricing for EAA brands, various other itineraries taken together, is also slightly higher than last year.”


3Q 2011

  • “Capacity in third quarter is expected to increase by 4.8%, 3.4% in North American, 7.2% for EAA brands. Third quarter booking patterns are progressing quite well, with fleet-wide pricing well ahead of last year at lower occupancies. North American brand capacity for the third quarter is 36% in the Caribbean, down slightly from 41% last year; 25% in Europe, an increase from 17% last year, which is almost a 50% increase, or about a 50% increase, and 23% in Alaska, which is about the same as last year.”
  • “Pricing for all North American brand itineraries in the third quarter is well ahead of last year, with particularly higher occupancy than pricing in this year’s Alaska season. Pricing for North American brands in Europe is also ahead of last year at lower occupancies, which is not surprising, given the approximate 50% increase in European capacity for our North American brands this summer.  Caribbean pricing for the third quarter is higher than a year ago, also on lower occupancies. This is a refreshing change for our Caribbean programs, given the challenges we’ve had during the first and second quarter. For EAA, brand capacity is 88% in European itineraries. EAA pricing is nicely ahead of last year at slightly lower occupancies, notwithstanding the challenges resulting from the political unrest in the Middle East and North Africa.”
  • “We are forecasting fleet-wide pricing for the third quarter to be up nicely for both North America and EAA business segments.”
  • [Yields] “It came down a half a point primarily because of the Middle East, entirely because of the Middle East. I should say also there’s been some itinerary changes relating to Japan that we’ve tried to include in our numbers, as well. But they were really small.”

4Q 2011

  • "For the fourth quarter on a fleet-wide basis, capacity is up 5.9%, 3.3% for North America brands and 10.1% for EAA brands.
  • Pricing on a fleet-wide basis is nicely higher year-over-year, with a similar pattern to the third quarter. Occupancies are lower than last year, which is also consistent with the pattern that we are experiencing in the third quarter.
  • Fourth quarter booking picture is encouraging, but it’s early in the booking cycle, so I caution not to read too much into the fourth quarter booking picture at this time. North American brands are 42% in the Caribbean, down from 50% last year; 14% in Europe, up from 9% last year and 10% in Orient and Pacific cruises, which is about the same as last year. Pricing across North American brand itineraries is running higher than last year, at slightly lower occupancies across the fleet. EAA brands are 72% in Europe, up from 65% last year, with the balance in various other itineraries.
  • Pricing for European cruises is nicely higher year-over-year, with pricing for the various other itineraries taken together also higher on a year-over-year basis. Occupancies are lower for European itineraries, which is not surprising, given the 20% increase in European brand deployment for the fourth quarter.
  • While it’s still early to have a more precise picture for fleet-wide fourth quarter pricing, on a fleetwide basis, we are currently forecasting local currency revenues will be nicely higher in the fourth quarter."
  • “Caribbean pricing is strong in the fourth quarter. Similar to the third [quarter].”


Boosting our June revenue target to HK$19.5-20.5BN.



Last week was a good one in Macau with average daily gaming revenues increasing to HK$705 million per day from HK$622 million for the 1st two weeks of June.  We don’t yet know if the acceleration was hold related but we are upping our full month forecast to a range of HK$19.5-20.5 billion (+50% YoY).  These levels would still be a big sequential slowdown from May’s HK$23.6 billion but not surprising.  June does not contain a Golden Week and May also benefited from high VIP hold.  We would consider a HK$20 billion June to be seasonally and sequentially appropriate given May’s hold adjusted performance.


Market shares held fairly steady from last week with Galaxy and LVS giving up some share to MGM which seems to be back to a normalized level following an unlucky first 2 weeks.  Interestingly, while still early it looks like the two major peninsula operators – Wynn and SJM – have lost the most share since Galaxy opened on Cotai.  LVS and MPEL with primarily operations on Cotai, have each lost only 50bps.  If market share and market revenue trends continue, it still looks like MPEL has the most upside relative to consensus EBITDA expectations for Q2.




Notable macro and industry-specific news items and price action from the restaurant space as well as our fundamental view on select names.





Corn stocks continue to nosedive. Analysts expect a 3% increase in consumption and although production is in its fifth year of record highs, supply won't match demand. Many see the steady increase in corn usage both as livestock feed, a biofuel, and the base of an ever growing group of other products as being the driving force behind the grain’s climb. In the next twelve months, it is estimated that Chinese consumption is 47% higher than a decade ago, adding to demand an amount greater than the entire crop of Brazil.



  • SBUX UK lost 34.2 million pounds sterling last year.  The chain suffered a 10 million pound hit related to the collapse of the Borders’ UK operations.
  • CMG has hired Mark Fabiani who will provide communications counsel related to an ongoing federal criminal investigation into whether the restaurant chain knowingly hired illegal immigrants. Chris Arnold, communications director for Chipotle, confirmed the hire in an email to PRWeek. Most recently, Fabiani was tapped by Goldman Sachs to help rebuild its image. He has also worked with Lance Armstrong to help defend the seven-time Tour de France winner against doping accusations.
  • JACK pulls toys from its kid's meals and redesigns the menu boards. They say they weren't bending to pressure to remove the toys, but that the toys weren't a driving factor for business. The chain’s new menu boards seek to draw attention to higher margin items and reduce clutter.
  • CBOU, PEET, KKD, TAST gained on accelerating volume on Friday. SONC and CMG declined on accelerating volume.


  • PFCB was cut to Equal Weight at Morgan Stanley. The price target embedded in the report is $51.
  • MRT and EAT gained on accelerating volume.  TXRH declined 1.5% on accelerating volume.
  • MS raises TXRH to Overweight. 




Howard Penney

Managing Director

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