CCL F2Q 2015 CONFERENCE CALL NOTES

Takeaway: CCL today confirmed the European challenges we have been highlighting. It is responsible for revenue yield guidance not being raised.

CCL F2Q 2015 CONFERENCE CALL NOTES - 1

 

CCL F2Q 2015 CONFERENCE CALL NOTES - 2

 

CONF CALL

  • Carnival brand: Double digit improvement in ticket revenue yields
  • Overcame European brand challenges from macro/geopolitical challenges
    • We have been stressing European pricing as a risk
  • Will deploy 4m cruise berths in 2016 in China
  • China outboard travel expected to double in 2020
  • Princess will be deployed in China in 2017
  • China represents 5% of CCL's guests
  • Onboard revenue +6% in constant dollars in F2Q
    • Successful rollout of our casino engagement program, beverage packages and additional bandwidth are just a handful of examples of initiatives that drove onboard strength
  • Remain on track for $70-80m savings
  • Will step up marketing costs in 2H 2015
  • Caution investors on ongoing macroeconomic and geopolitical risks not to get ahead of expectations for the year simply based on consistency and exceeding quarterly guidance.
  • Remain committed on double-digit ROIC growth target.
  • F2Q 
    • Beat driven by: better onboard/other yields, lower opex due to timing of costs, and better fuel/FX impact
    • Capacity up 2% - NA (flat), EAA (+6%) 
    • Net ticket yield: +3.5%
    • Improvement particularly strong in North America
    • Net fuel/FX benefited F2Q by 10 cents
  • FY 2015: anticipate $27m in restructuring costs, not included in guidance
  • Bookings for next 3 quarters have been strong; volumes ahead at slightly lower prices
  • At this point in time, cumulative fleet-wide bookings for the third quarter are well ahead at slightly lower prices but again driven by the unfavorable transactional currency impact. 
    • Caribbean itineraries are significantly ahead on occupancy at slightly lower prices, which bodes well for pricing on future bookings and pricing in the last six weeks has been higher. 
    • Alaskan itineraries are nicely ahead on both price and occupancy. 
    • All other North American brand deployments combine which includes the seasonal European program are highly ahead on occupancy but at lower prices which are being unfavorably impacted by transactional currency.
    • For EAA brands, all itineraries combined are nicely ahead on price with occupancies that are in line with the prior year. 

Q & A 

  • Why is the constant currency guidance unchanged despite the meaningful beat in the second quarter? Mostly Europe 
    • (Strong bookings there, which implies awful pricing)
  • Costa having trouble with yields. Lots of macroeconomic difficulties in Europe. 
  • Pricing discipline in Caribbean: CCL will continue to try to put pricing integrity in and discipline in for our brands independently of what anyone else does.
  • Advertising increases - not related to higher promotional spending
  • 3.7% capacity increase in 2016; 1Q 2016 ahead on occupancy; cautiously optimistic on 2016
  • Book load position: less inventory on bookings for rest of year
    • We think it's impacted by shift of Wave Season by a couple of months
  •  Anticipate LNG will be fuel of choice
  • Air/transportation: expect 20-25% improvement in costs
  • Onboard yields have been strong on NA brands. Weaker in EAA brands. 
  • MERS impact: Have itineraries from China that touch Korea and have modified some itineraries
  • Continue to see yield strength in China
  • In the next 3-4 years, CCL should hit double digit yields
  • Real competition for new cruisers is land-based
  • CCL wants the competition to advertise and promote
  • In the past, given $600m in advertising spend; this year will be 'few % points higher'
  • Overall 1st time cruisers are up dramatically - part of it due to China, another part of it due to the Caribbean since there was so much capacity last year.  The only way to fill those ships was to get a lots of new first time cruisers. 
  • New ship capacity: 6,600 is total capacity; passenger capacity is just north of 5,000 
  • No impact from China river boat incident
  • Assumed onboard spend rising 2% in 2H 2015; more challenging comps in 2H 2015
  • More dry docks in 2015 driving up costs by 2-3%. Expect dry docks to decline in 2016 (about half of 2015 increase will go away).
  • European capacity up 6% in 2015 but nowhere near double digit Caribbean capacity increase last year. So can't blame it on capacity.

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more