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What Caused Carnival Corporation’s Revenue to Fall?

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Dec. 23 2015, Published 9:39 a.m. ET

Revenues fall

Carnival (CCL) saw a marginal fall in its top line numbers. The revenues for 4Q15 fell by about 2.5% year-over-year to reach $3.71 billion. Results were dampened by the adverse impact of the strengthening dollar, and the company missed its analyst estimates by about $10 million during the fourth quarter of the year.

The company’s revenues, excluding the impact of the strong dollar, grew by about 4.1% year-over-year for 4Q15. This was better than the company’s guidance of a 2.5% to 3% growth, indicating strong growth in business demand and better revenues from the sales of food, alcohol, and merchandise on Carnival’s cruises. Also, the diverse fleet of ships helps the company cater to a wide range of consumers.

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Outlook

For the first quarter of 2016, CCL expects its net revenue yields—in constant currency—to grow in the range of 3.5% to 4.5% year-over-year. Carnival expects to see better top line growth due to a host of new initiatives aimed at filling its cruise ships with customers. It also expects to benefit from the probable boost of on-board sales of food, alcohol, and other merchandise.

Carnival has a market share of ~47%, followed by Royal Caribbean (RCL) at ~23%, and Norwegian (NCLH) at ~10%. However, Carnival’s competitive advantage is due to scale. It operates a fleet of 99 ships. This is more than double the 41 ships operated by Royal Caribbean, Carnival’s closest competitor.

ETFs such as the PowerShares Dynamic Large Cap Growth Portfolio (PWB), the PowerShares Dynamic Leisure and Entertainment Portfolio (PEJ), and the Consumer Discretionary Select Sector SPDR Fund (XLY) hold stocks of the three major cruise liners.

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