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In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance.

CCL 4Q REPORT CARD - C

OVERALL

  • WORSE:  We expected CCL to give 2013 yield guidance around 3.5%, below Street expectations of close to 4% yield growth.  So 1-2% yield growth guidance is indeed very disappointing. Softening trends in Germany and UK continues to drag down the outlook for Europe.  Higher 2013 capacity growth rate from 3.4% to 3.6% is not helping.  Although we do see positive longer-term catalysts, today's selloff is warranted and at 16x forward PE, valuation continues to be a stretch given all the uncertainties. 

2013 COSTS

  • SAME:  ex items, 2013 net cruise costs ex fuel guidance of 1-2% is in-line with previous guidance
  • PREVIOUSLY:  
    • "These unique factors alone will drive our unit costs up 1.5% to 2%. Therefore, I am expecting overall unit costs, excluding fuel, to be higher in 2013 compared to 2012."
      • To begin with, we are expecting that Costa will fill their ships in 2013, which will lead to higher food and other unit costs associated with this higher occupancy. This will simply be a reversal of the occupancy-driven unit cost reduction in 2012. 
      • Our insurance costs will be higher in 2013. 
      • We are anticipating charges relating to a closed multiemployer pension plan for certain British officers and crew. The multiemployer pension plan accounting rules require us to expense our contribution to unplanned deficits when the invoices are received."
      • Our increasing emerging market deployment for Japan by Princess, for China by Costa, and for Australia by Carnival Cruise Lines will also increase our costs. 

COSTA

  • SAME:  The outlook on Costa remains bright.  Occupancy is expected to return to normalcy but pricing will not have a full recovery given the weak economies in Europe.  
  • PREVIOUSLY:  "Beginning in the second quarter of 2013, we expect Costa's revenue yields to nicely increase year-over-year against these easier comparisons for the last year's second quarter. We are very pleased with the progress that Costa has made, and our expectation is that Costa's financial performance will continue to improve as we move through 2013."

CAPACITY

  • WORSE:  2013 capacity growth forecast increased from 3.4% previously to 3.6%. Capacity guidance in FQ1 is increased to 4.2% from 4.1% previously.
  • PREVIOUSLY:  "Fleet-wide capacity for 2013 is expected to increase by 3.4%: 4.1% in Q1, 3.2% in the second quarter, 3.8% in Q3, and 2.4% in the fourth quarter."

BOOKINGS

  • WORSE:  European bookings continue to be very close-in.  But even bookings in some of the relatively less weak European economies (e.g. UK, Germany) are experiencing a closer in pattern.
  • PREVIOUSLY:  "For certain brands it's still pretty close-in. You're starting to see some evidence of it pushing out more recently because of the recent increase in bookings over the last quarter. But it's still closer-in than it has been historically. And that's been the pattern. We're seeing it more in the European brands, but we're also seeing a little bit of it, but not quite as much, in the American brands."

ON BOARD YIELD

  • SAME:  Similar to 2012, onboard spend 2013 guidance will be ~+2% with increases in all the major categories.
  • PREVIOUSLY:  "For certain brands it's still pretty close-in. You're starting to see some evidence of it pushing out more recently because of the recent increase in bookings over the last quarter. But it's still closer-in than it has been historically. And that's been the pattern. We're seeing it more in the European brands, but we're also seeing a little bit of it, but not quite as much, in the American brands."

EUROPE OUTLOOK

  • WORSE:  The U.K. and Germany economies are getting softer.  Yields in those markets will be lower and the booking curve has tightened in those countries.  CCL also has higher capacity growth in Europe than its competitors, particularly in Germany. 
  • PREVIOUSLY:  "I would say that U.K. and Germany has held up better than we expected in the last two conference calls I would say a little bit, while Italy, France and Spain struggled....We like the European demographics. We like the market. We think the market is still considerably underpenetrated relative to other developed markets, so we like our investments in Europe from a long-term standpoint and once we get through these difficult economic challenges that we're experiencing, especially in Southern Europe.... I think we'll start to see some stabilization and some very positive results for the company longer-term."

FUEL EFFICIENCY

  • BETTER:  Fuel efficiency will be 5% in 2013, higher than previous guidance of 3%.  Historically, CCL has reduced fuel consumption by 2-3% per year.
  • PREVIOUSLY:  "We're working very hard to reduce consumption and we believe that we can continue to do that at significant levels, and I think next year we'll do it
    again is my perception...we're looking at 3% for the year."