Episode summary
Carnival Cuts Profit Outlook as Iran War Pushes Up Fuel Cost | Bloomberg Intelligence
Bloomberg Intelligence
· · Hosts: Paul Sweeney, Scarlet Fu · Guests: Brian Egger, Matthew Schettenhelm, George Ferguson, Randall Williams
Summary
Carnival’s latest quarter showed strong demand, with 85% of the year sold and revenue guidance raised, but the company cut EBITDA and full-year profit expectations because fuel costs jumped after the war in Iran pushed up crude prices. An analyst said the cruise operator’s adjusted net income could take about a $500 million hit from higher fuel, even after $150 million of offsetting cost savings, and warned that the assumption of Brent at 80 to 90 in the second half may prove too low. He also said cruise lines usually do not add fuel surcharges and instead rely on efficiency gains, with Carnival historically less active on hedging than peers.
The show then turned to social-media addiction litigation, where an analyst said recent jury verdicts against Meta and Alphabet are the start of a broader wave of cases. He argued the individual awards are not financially material for large platforms, but the headline risk is real and could help pressure companies toward a global settlement. The larger legal overhang, he said, is state attorneys general suits and school-district cases.
A third segment covered JetBlue, where an analyst said higher fuel and weak leisure pricing are squeezing low-cost carriers and may force capacity cuts if the war persists. The final segment shifted to sports business, with discussion of NBA expansion to Seattle and Las Vegas and the likelihood that Major League Baseball’s next labor fight will center on a salary cap versus a spending floor.
Key takeaways
- An analyst said Carnival’s fuel-cost exposure could cut adjusted net income by about $500 million if Brent stays elevated in the second half.
- Carnival raised revenue guidance but still cut EBITDA outlook because demand is solid while fuel costs tied to the Iran war are rising.
- An analyst said Meta and Alphabet face heavy litigation headlines, but the current jury awards are too small to materially hurt their businesses.
- For JetBlue and other low-cost carriers, an analyst said higher fuel prices and weak leisure demand could force fare increases and eventually capacity cuts.
- The sports discussion pointed to Seattle and Las Vegas as the likeliest NBA expansion cities, with ownership of arenas seen as a major advantage.
Notable quotes
“the concern would be if that war persists, they are modeling in a level of fuel cost assumption for the second half that might not be conservative enough”
“their estimate is that the full year impact on their adjusted net income from the fuel price increase we've seen since December could be about $500 million”
“There are a number of other cases lined up to go to juries this year. And the whole goal here is to try to shape a a settlement potentially”
“I think the opportunity to pass it along is pretty good this time and typically they do typically they pass it along at a lag”
How the episode opens
Bloomberg Audio Studios. Podcasts, radio, news. You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10:00 a.m. Eastern. — On Apple CarPlay and Android Auto with the Bloomberg Business app. — Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's turn our gaze to the cruising business. I know nothing about the cruising business. That will change in October when I take my first cruise. I know.
He's finally taking the plunge.
Finally taking the plunge. But with the guy we have here now, our next guest is an expert on all this stuff. Brian Egger he covers all the fun stuff, gaming, casinos, hotels, and cruises for Bloomberg Intelligence.
Carnival what's going on at Carnival here? So they came out with what otherwise would have been a very good quarter in terms of bookings, demand, 85% of the year sold, actually raised revenue guidance. But they had to cut EBITDA guidance because the cost it from fuel due to the war in Iran.
And so the underlying demand part of the business is quite good. You know, the concern would be if that war persists, they are modeling in a level of fuel cost assumption for the second half that might not be conservative enough. The thing that people like about these cruise lines and cruise line operators is that they have a lot of visibility into their bookings cuz people book years in advance or months in advance as in the case of Paul Sweeney and his upcoming cruise.
But that also locks in the revenue that they brought in. Do cruise lines add a fuel surcharge later on because you know, oil prices have gone up so much or is it something they just have to eat?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- carnival earnings outlook
- oil prices and fuel costs
- social media addiction litigation
- airline merger and sale options
- sports franchise expansion
Companies and tickers mentioned
- CCL
- META
- GOOGL
- GOOG
- JBLU
- ALK
- UAL
- Carnival
- Meta
- Alphabet
- JetBlue
- Alaska Air Group
- United Airlines Holdings
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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