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In preparation for CCL FQ3 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.

OVERALL

  • WORSE:  While the quarter was a little better than expected, the outlook was disappointing.  1H 2014 yield guidance was substantially lower than what the Street was expecting as was Q4 EPS and yield guidance.  We continue to believe the ramifications from a tarnished Carnival brand have been underestimated.

CCL F3Q REPORT CARD - ccl

EX CARNIVAL NA BRANDS

  • WORSE:  North American brands' (ex Carnival) bookings volume for the next 3 quarters has been flat at higher prices in the last 12 weeks.
  • PREVIOUSLY:  "Fleet-wide bookings during the last 11 weeks from the end of March covering the next three quarters are running higher year-over-year at higher prices."
    • "North American brands' bookings and pricing during this 11-week period are higher."
      • "Caribbean itinerary booking volumes in the last 11 weeks covering the next three quarters, are slightly lower year-over-year at slightly higher prices."
      • "Alaska bookings, again excluding Carnival, are significantly higher at lower prices."
      • "European itinerary bookings for North America brands, are slightly lower at nicely higher prices."
    • "EAA brands' bookings and pricing are also higher versus the prior year."
      • "European itinerary booking volumes, and that's approximately 50% of EAA capacity, are significantly higher at higher prices."
      • "Caribbean itinerary volumes for EAA brands, which are just under 10% of EAA capacity, are running behind last year, but also at nicely higher prices."

CARNIVAL BRAND 

  • WORSE:  While management states that the Carnival brand continues to recover, F4Q pricing declines are now trending in the double digits while 1H 2014 yield guidance was a bomb mainly due to Carnival - suggesting little improvement.
  • PREVIOUSLY:  
    • "Bookings and pricing over the last 11 weeks are both lower year-over-year in a high single-digits low double-digits range respectively." 
    • "On recent surveys, consumer perception of the brand has significantly improved since the incidents back in March, and we expect this trend to continue as confidence builds back in the brand. We will need to cycle through a full year before we begin to see positive pricing comparisons, which should begin in the second half of 2014."

4Q TRENDS

  • WORSE:  Lower than expected yields due to 'geopolitical events in the Eastern Med'.  Occupancy and pricing dropped across most ships.
  • PREVIOUSLY:  
    • "On a fleet-wide basis, excluding Carnival, cumulative occupancies are slightly lower at slightly lower pricing."
    • "For North American brands, excluding Carnival again, occupancies are lower at higher prices."
      • "Carnival Cruise Lines' occupancies for the fourth quarter are also lower at slightly higher prices."
    • "For EAA brands, occupancies are flattish year-over-year at lower prices."
      • "Costa brand occupancies for the fourth quarter are nicely higher at lower prices...This is the first time during the last several quarters that Costa has been ahead of the closer-in booking curve this early in the booking process. We read this as a very positive sign are expecting Costa to have a nice increase in revenue yields in the fourth quarter."

1Q 2014 TRENDS

  • WORSE:  Ex-Carnival brands are not offsetting the bleeding from the Carnival brand by much, as revenue yield change for 1H 2014 is expected to be in the low single-digit decrease, similar to 2H 2013.
  • PREVIOUSLY:  "On a fleet-wide basis, and this includes Carnival, occupancies are lower year-over-year at higher prices. North American brands' occupancies, again including Carnival, are lower year-over-year at nicely higher prices. EAA brands' occupancies are also lower at slightly higher prices."

COSTA/EUROPE 

  • MIXED:  CCL expects Costa's performance to strengthen over 2013 and throughout 2014.  Brand perception improved in Italy and France but political uncertainties continue to pressure the European markets.
  • PREVIOUSLY:  
    • "A major challenge in Europe right now is the weakened economies, especially in Italy and Spain."
    • "Northern Europe product did have a significant capacity increase this year relative to the Med, and we do not expect that to recur in 2014."

HIGHER SPENDING COSTS

  • SAME:  Carnival expects NCC ex fuel/impairments to be roughly similar to that seen in 2H 2013.  There will be more marketing activity, ship investments and onboard products such as food and entertainment.  Dry dock costs will be higher due to vessel enhancements. 
  • PREVIOUSLY: 
    • "So beginning in the second half of the year, we are planning to increase marketing spend across all North American brands and expect this to continue into 2014."
    • "We had talked about the vessel enhancements being a multiple year process. So there will be some of that in 2014 as well."