Ahead of the Bell: Carnival

Carnival shares tumble on guidance cut, worries about drops in cruise pricing

Associated Press

NEW YORK (AP) -- Carnival slumped 8 percent in premarket trading as steep discounts for cruises pressure its revenue.

The Miami company cut its outlook for the year late Monday as it wrestles with a string of high-profile incidents in which ships have malfunctioned, leaving thousands of passengers stranded at sea.

Carnival said late Monday that by lowering prices for cruises it is winning over customers, but that's led to lower-than-expected net revenue yields.

The company said it now expects to post a 2013 profit of $1.45 to $1.65 per share, down from its previous projection of $1.80 to $2.10 per share. Analysts polled by FactSet expected a profit of $1.90 per share.

For the second quarter, Carnival expects earnings of 4 to 8 cents per share. Analysts are looking for 6 cents per share.

Before the opening bell, shares of Carnival Corp. fell $2.80 to $35.52.

William Blair stripped the company of its "outperform" rating on the stock, saying that the price cuts show how far Carnival must go to rebuild its brand.

Analyst Sharon Zackfia issued a rating of "market perform," pointing out that Carnival is trimming its guidance less than a month after rivals Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings Ltd. backed their outlooks for the year.

Jefferies' Ian Rennardson said the new guidance is consistent with his previous view that Carnival is significantly lagging its competitors. He added that while the company will be able to meet the reduced 2013 guidance, its 2014 outlook could be at risk.

In February, the Carnival Triumph was crippled by an engine fire and left 4,200 people stranded out in the Gulf of Mexico for five days. Passengers endured filthy conditions as the Triumph was towed to Mobile, Ala.

And the company ended the voyage of the Carnival Dream in March after the ship's backup emergency diesel generator failed, causing problems with elevators and toilets. Carnival was forced to charter airplanes to fly home the ship's 4,300 passengers back to Florida from the Caribbean island of St. Maarten.

In response to the incidents, the company's Carnival Cruise Lines subsidiary said last month that it would make a $300 million investment in emergency generators, fire safety equipment and improved engine rooms for all 24 of its ships.

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