Carnival Corp has cut its annual profit forecast, citing higher fuel costs as a major factor. The company's decision comes amid rising geopolitical tensions in the Middle East, which have disrupted global supply and pushed up oil prices. As a result, Carnival is now expecting full-year adjusted earnings per share to be around $2.21, down from its previous expectation of up to $2.48. This represents a significant downward revision, highlighting the impact of fuel costs on the company's bottom line.
The spike in fuel prices is largely due to attacks on oil and transport facilities across the Middle East, as well as disruptions to energy flows through the Strait of Hormuz. This critical waterway carries about a fifth of global oil flows, making it a crucial component of the global energy supply chain. The disruption has resulted in higher costs for Carnival, which typically does not hedge fuel prices.
Carnival's decision to slash its profit outlook is also driven by its lack of exposure to the region. However, even with this limited exposure, the company expects higher fuel costs to have a significant impact on its profits. With Brent crude averaging $90 a barrel for the rest of April and May, $85 in the third quarter, and $80 in the fourth quarter, Carnival is facing a challenging environment.
The company's guidance assumes that fuel prices will remain at these levels for the remainder of the year. However, with current spot prices already higher than these projections, it remains to be seen whether Carnival can manage its costs effectively. The company's decision to cut its profit outlook sends a clear message about the impact of fuel costs on its business.
The impact of the Iran war on global energy markets is still unfolding, and it will be interesting to see how Carnival navigates this challenging environment. Despite the uncertainty, strong bookings across the sector suggest that cruise demand remains resilient, even in the face of economic uncertainty.
Carnival's bookings for 2026 were up double digits, which further pulled forward its already record booked position for the remainder of the year. This positive trend is a welcome relief for the company, but it also highlights the challenges posed by fuel costs. The company expects nearly $150 million in operational gains from higher yields and lower non-fuel costs to help offset more than $500 million in higher fuel expenses.
The company's decision to cut its profit outlook has sent shockwaves through the industry, with U.S.-listed shares of Carnival falling nearly 5% in early trading. The decline is also reflected in the company's year-to-date performance, with shares down 17%. This downward trend highlights the significant impact of fuel costs on Carnival's business.
Carnival's CEO Josh Weinstein noted that the company has the scale and liquidity to handle fluctuations in fuel prices. However, even with this strong position, the company is facing significant challenges. The decision to cut its profit outlook sends a clear message about the need for caution in the face of rising fuel costs.
The announcement also includes a $2.5 billion share buyback, which may be seen as a way for Carnival to mitigate the impact of fuel costs on its business. However, with fuel prices expected to remain high, it remains to be seen whether this move will be enough to offset the challenges posed by the Iran war.
The escalating tensions in the Middle East are having a ripple effect on the global energy market, with fuel prices rising sharply. This trend is expected to continue, posing significant challenges for the cruise industry.
