Carnival Corp, the world's largest cruise operator, forecast an adjusted profit below market estimates for the current quarter, blaming increased competition in the Caribbean.
Shares of the company, which operates the Carnival, Holland America and Costa cruise lines, fell as much as 3 percent.
"The North American brands are ahead on price but are still behind on occupancy as a result of the large increase in industry capacity in the Caribbean," Chief Financial Officer David Bernstein said on a conference call.
Carnival forecast an adjusted profit of $1.38-$1.44 per share for the third quarter ending August 31, when the company usually earns a lion's share of its earnings due to peaking demand in the summer.
Analysts on average were expecting $1.51 per share, according to Thomson Reuters I/B/E/S.
UBS analyst Robin Farley termed the forecast a "surprise" for a quarter that would have plenty of European and Alaskan cruises to offset weakness in the Caribbean business.
Carnival said the industry was offering more promotions to win passengers for cruises in the Caribbean region.
"Carnival Cruise Lines decided to hold price and give up the occupancy," Bernstein said.
Smaller rival Royal Caribbean Cruises Ltd said in April that it had strong bookings for the Caribbean but the environment remained "very promotional".
About 35 percent of Carnival's passenger capacity was in the Caribbean in the year ended November.
Industry analyst Stewart Chiron said Carnival and Royal Caribbean were pointing to Europe-based MSC Cruises that is offering 7-night cruises in the Caribbean for as low as $199.
Carnival said it expected third-quarter net revenue yields, which blend ticket sales and money spent onboard, to be flat to down 1 percent on a constant currency basis.
Net revenue yields are expected to be slightly up in the fourth quarter, the company said.
Carnival raised its full-year adjusted profit forecast to $1.60 to $1.75 per share from $1.50-$1.70.
Net income rose to $106 million, or 14 cents per share, in the second quarter ended May 31, from $41 million, or 5 cents per share, a year earlier.
Excluding items, the company earned 10 cents per share.
Revenue rose 4 percent to $3.63 billion.
Analysts on average had expected earnings of 2 cents per share on revenue of $3.61 billion.
Carnival's shares recouped some of their losses to be down 1 percent at $38.91 in afternoon trading on the New York Stock Exchange on Tuesday.
(By Sruthi Ramakrishnan; Editing by Don Sebastian and Sriraj Kalluvila)