Carnival forecasts third-quarter profit below estimates on higher fuel costs

Key facts

• Carnival Corp. forecasts third-quarter profit below analyst estimates.
• Higher fuel prices and geopolitical tensions are impacting the company's margins.
• The cruise operator expects adjusted earnings per share of approximately $1.35.
• Analysts had estimated earnings per share of $1.42.
• Carnival shares declined about 10% in premarket trading.

Carnival Corp. announced on Tuesday that it forecasts its third-quarter profit to fall below analyst estimates, primarily due to the persistent impact of elevated fuel prices on its profit margins. The cruise operator's shares experienced a decline of approximately 10% in premarket trading following the announcement.

Cruise companies, which are significantly reliant on fuel oil and marine gas oil, have been facing a challenging operating environment. The conflict in the Middle East has heightened concerns regarding potential prolonged supply disruptions, further impacting fuel costs.

Carnival, notably, is the only major U.S. cruise line that typically does not hedge its fuel costs. The company stated it is currently "overcoming extreme geopolitical headwinds and nearly 30 percent higher fuel costs." In March, Carnival had already indicated that the impact of increased fuel expenses was expected to exceed $500 million.

According to data compiled by LSEG, Carnival anticipates its quarterly adjusted earnings per share to be around $1.35, which is below the consensus estimate of $1.42 among analysts.