Carnival Corp (NYSE:CCL), the cruise operator, may see its first quarter profits come in lower than analysts initially expected as fuel costs surge and journeys in the Red Sea are rerouted.
Analysts at Jefferies expect underlying earnings to reach US$840 million in the first quarter, down from prior estimates of US$890 million.
Revenue forecasts have also been cut slightly from US$5.29 billion to US$5.27 billion.
Jefferies downgraded its forecasts in reaction to a Carnival press release which stated it would be rerouting ships with itineraries through the Red Sea in May due to the increasing presence of Houthi attacks.
Carnival is also expected to see fuel expenses rise due to recently higher crude oil prices and the lack of hedging.
While analysts note the group’s claims of strong bookings and its highest occupancy ever, they lower estimates to “reflect a potentially volatile recovery ahead”.
“Though we note yields should remain elevated given positive onboard spending trends from product bundling,” Jefferies said.
Looking further forward, the US bank has downgraded both its 2024 and 2025 estimates to reflect these concerns.
In 2024, revenues are expected to reach $24.1 billion instead of the prior guidance of US$24.6 billion, while underlying profit forecasts have been pulled back from US$5.56 billion to US$5.3 billion.
In 2025, sales are now predicted to reach US$27 billion rather than US$26 billion, with underlying earnings ticking higher from US$6 billion to US$6.2 billion.
Jefferies reiterates its buy rating for Carnival and targets a US$25 share price – 46% higher than the current market value.
Carnival reports results on Wednesday.