Carnival Corporation & plc, the parent company of various cruise lines including Carnival Cruise Line, Costa Cruises and P&O Cruises, has seen its stock fall after forecasting lower than expected third-quarter profits, despite a stronger start to 2023. 

The company’s stock fell by over 11% after the release of its earnings from the second quarter (Q2) of 2023 report before recovering slightly to a 7.6% fall, despite reporting results above expectations. 

Commenting on the results, CEO Josh Weinstein said: “We reached a meaningful inflection point for revenue this quarter, with net yields surpassing 2019’s strong levels and we achieved positive operating income, cash from operations and adjusted free cash flow. 

“Based on continued strength in pricing, we delivered outperformance in the second quarter and raised our expectation for revenue in the second half which, coupled with the interest expense benefit we are capturing from deleveraging, will bring another $275m to the bottom line for the year.” 

However, though the company adjusted its projected net income from $0.95bn to $1.05bn for Q3 2023, it also said it was expecting costs 1.5% higher than initially predicted. 

The higher costs are due to a slower decrease in inflation, continued increases in adverting investment and “incentive compensation increases reflecting expected improvements in the company’s current and long-term performance”, according to the Q2 report. 

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Despite the projected lower profits, Carnival’s earnings are still reflective of the strong post-pandemic comeback that the cruise industry has made, with the company’s net loss of $0.4bn in Q2 2023 far lower than the net loss of $1.8bn in Q2 2022. 

The company’s ship occupancy levels are also expected to be high with a projected level of 107% for Q3 and over 100% for the year, reflecting record-high bookings with the total made during Q2 2023 reaching an all-time high for future sailings. 

Weinstein also said: “Booking volumes have been tremendous and we are gaining momentum with favourable pricing trends, which reflects improved commercial execution and returns on our advertising investments. 

“The booking lead times for our North America and Australia segment are now further out than we have ever seen, while lead times for our Europe segment continue to lengthen and are now within ten percent of 2019 levels, which is an improvement of ten points from the last quarter.”

Alongside its earnings figures, Carnival’s report also included the introduction of the SEA Change program, which sets out strategic goals over the next three years, covering sustainability, EBITDA and adjusted return on invested capital. 

The sustainability targets will notably see the company aiming to deliver a 20% reduction in carbon intensity when compared to 2019, continuing sustainability efforts made by the company including the use of methanol and biofuels.