MARCH 15, 2013 — As yet another Carnival Cruise Lines ship experienced problems, parent Carnival Corporation (NYSE/LSE: CCL; NYSE:CUK) reported better than expected first quarter revenue of $3.6 billion.

Carnival Legend: Skipping a port because of reduced sailing speed

The latest Carnival cruise ship with issues is the Carnival Legend. It has had to reduce sailing speed and drop a planned stop at Grand Cayman Islands, instead returning to Tampa, Fla. In the scale of things, this is not a major mishap. If Carnival has a secret Refund-O-Meter, this one isn't nudging the needle much. Legend passengers on the affected cruise will reportedly get a $100 credit, refunds on pre-purchased shore excursions and half-off on a future cruise.

While all this is great material for bloggers and twitterers, investors are more likely to be swayed by the numbers in the first quarter results and by its guidance for what future earnings will be. Seemingly, economic uncertainty in Europe remains a major concern and  the Carnival Triumph incident is not only going to mean repair costs but "expenses related to the enhancement of vessels in the remainder of the fleet as a result of the ship incident."

The numbers

Carnival Corporation announced non-GAAP net income of $65 million, or $0.08 diluted EPS for the first quarter of 2013. Reported U.S. GAAP net income, which included net unrealized losses on fuel derivatives of $28 million, was $37 million, or $0.05 diluted EPS. Non-GAAP net income for the first quarter of 2012 was $13 million, or $0.02 diluted EPS. Reported U.S. GAAP net loss was $139 million, or $0.18 diluted loss per share, for the first quarter of 2012, which included the non-cash write-down for Ibero Cruises goodwill and trademark assets of $173 million and net unrealized gains on fuel derivatives of $21 million. Revenues for the first quarter of 2013 were $3.6 billion in line with the prior year.

Chairman and CEO Micky Arison noted that first quarter earnings were better than in the corporation's December guidance due to the timing of certain expenses partially offset by $0.02 per share resulting from voyage disruptions and related repair costs.

Key metrics for the first quarter 2013 compared to the prior year were as follows:

• On a constant dollar basis, net revenue yields (net revenue per available lower berth day or "ALBD") decreased 2.3 percent for 1Q 2013, which was in line with the company's December guidance, down 2 to 3 percent. Gross revenue yields decreased 3.4 percent in current dollars.
• Net cruise costs excluding fuel per ALBD decreased 3.1 percent in constant dollars, which was better than December guidance, down 1.5 to 2.5 percent primarily due to the timing of certain expenses. Gross cruise costs including fuel per ALBD in current dollars decreased 5.5 percent.
• Fuel prices decreased 4 percent to $677 per metric ton for 1Q 2013 from $707 per metric ton in 1Q 2012 and were in line with the December guidance of $674 per metric ton.
• Fuel consumption per ALBD decreased 5 percent in 1Q 2013 compared to the prior year.
• The company repurchased 2.3 million shares valued at $87 million during fiscal
• 2013.

Earlier this week the company took delivery of AIDA Cruises' 2,192-passenger AIDAstella. In addition, the company recently reached an agreement for the sale of the three original 212-berth ships for its luxury Seabourn brand, which are expected to leave the fleet in 2014 and 2015.

2013 Outlook

At this time, says the company, cumulative advance bookings for 2013 are behind the prior year at prices in line with the prior year levels. Since January, booking volumes for the remainder of the year, including Costa, are running significantly higher than last year at slightly higher prices.

"Booking volumes during our seasonally strong wave period have remained solid with pricing comparisons improving in recent weeks," said Mr. Arison. "However, economic uncertainty in Europe continues to hinder yield growth."

"Despite considerable attention surrounding the Carnival Triumph, we had been encouraged to see booking volumes for Carnival Cruise Lines recover significantly in recent weeks," said Mr. Arison. Attractive pricing promotions, combined with strong support from the travel agent community and consumers who recognize the company's well-established reputation and quality product offering, were driving the strong booking volumes."

The company now expects full year net revenue yields, on a constant dollar basis to be in line with the prior year compared to up 1 to 2 percent in the December guidance.

The change in net yields is due to the economic uncertainty in Europe and pricing promotions for the Carnival brand combined with less than expected growth in onboard revenue across the group. The company also expects net revenue yields on a current dollar basis to be flat for the full year. The company expects net cruise costs excluding fuel per ALBD for 2013 to be up 2.5 to 3.5 percent on a constant dollar basis compared to up 1 to 2 percent in the December guidance. The change in cost guidance is due to the impact of repair costs, as previously announced, as well as, expenses related to the enhancement of vessels in the remainder of the fleet as a result of the ship incident.

Taking the above factors into consideration, the company forecasts full year 2013 non- GAAP diluted earnings per share to be in the range of $1.80 to $2.10, compared to 2012 non- GAAP diluted earnings of $1.88 per share.

Looking forward, Mr. Arison stated, "Our long term business fundamentals remain strong as we broaden our customer base of new and repeat cruisers through attractive product offerings, high satisfaction levels and compelling value propositions. We expect to drive return on invested capital higher through a measured pace of capacity growth and a continued focus on fuel consumption savings. We continue to expect over $3 billion of cash from operations this year and remain committed to returning free cash flow to shareholders in 2013 and beyond."

Second Quarter 2013 Outlook

Second quarter constant dollar net revenue yields are expected to be down slightly compared to the prior year. Net cruise costs excluding fuel per ALBD for the second quarter are expected to be up 9.5 to 10.5 percent on a constant dollar basis compared to the prior year due primarily to the timing of certain expenses and repair costs related to the ship incident. Based on the above factors, the company expects non-GAAP diluted earnings for the second quarter 2013 to be in the range of $0.04 to $0.08 per share versus 2012 non-GAAP earnings of $0.20 per share.

At the end of the second quarter, the company will take delivery of Princess Cruises 3,560-passenger Royal Princess.