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Carnival Corporation (CCL) Is Charting a Turnaround Course

Carnival Corporation (NYSE:CCL) has received much publicity during the past few years. Unfortunately, almost none of this publicity has been good publicity, and the company is now in serious damage control mode. After reporting second quarter results that came in far below expectations, as the company heavily discounted the price of its tickets in order to get customers through the door, the company has embarked on a turnaround plan. First off is the removal of chairman and CEO Micky Arison from the CEO role. He is to be replaced by board member Arnold Donald – who has no operational experience in the cruise industry.

Carnival Corporation (NYSE:CCL)

Carnival Corporation (NYSE:CCL) Cruise Lines is split into several brands and the one that needs the most attention is Carnival Corporation (NYSE:CCL). famed for several high profile, highly preventable disasters last year. Consultants believe that the turnaround will take two or three years, depending of course on whether or not things actually go to plan.

The whole Carnival Corporation (NYSE:CCL) group has 100 ships, carries 10 million customers per year and is spending $700 million upgrading its vessels. However, the company has stated that advance bookings and prices for the rest of 2013 will be lower than last year. In addition, the group forecasts that fuel costs will be 3% to 5% higher this year and revenue per berth will be down 2% to 3% for the full year. Overall, diluted earnings per share will be in the range of $1.45 to $1.65, lower than the $1.88 reported in 2012.

Overall, analysts are viewing the turnaround plan with wait-and-see approach, as much depends on the company’s ability not to screw up. Having said that, it would appear as if the company has begun to learn from its mistakes and is focusing on improving relations with travel agents and restructuring discount offers. Moreover, the company’s most recent accident, which involved yet another power failure on board one of its ships, was handled in a all-round faster, cleaner and more effective way than its previous disaster, the well publicized fire on board a liner in the Gulf of Mexico that led to a PR nightmare.

Customer satisfaction

It seems as if Carnival Corporation (NYSE:CCL) will have more on its plate that just renovations and cost cutting. According to a report by J.D. Power and Associates on cruise line customer satisfaction, Carnival does not not rank well. Disney Cruise Line ranks the highest with a customer satisfaction score of 871 out of a possible 1000. Royal Caribbean Cruises Ltd. (NYSE:RCL) ranks second with a score of 838, and Holland America, which is part of the Carnival Cruise Lines holding company, ranks third, scoring 835.

Would investors do better elsewhere?

It could be prudent for investors to look elsewhere while Carnival Corporation (NYSE:CCL) recovers. Both Royal Caribbean and Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) are set to boom over the next few years. Indeed, Royal Caribbean Cruises Ltd. (NYSE:RCL) has a higher customer satisfaction rating that Carnival and Norwegian has already staged an impressive turnaround since 2008.

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