Analysts Encouraged by Carnival’s Second-Quarter Earnings Report

Analysts were mostly sweet on Carnival Corp.’s second quarter earnings report, despite the cruise line trimming its full-year guidance due to fuel costs. Carnival said during a conference call with analysts yesterday that it posted a $390 million profit in the quarter ended May 31, up from $380 million in the same period of 2006.

“Carnival’s commentary about fundamental trends was encouraging,” wrote Bank of America analyst Michael Savner in a note to clients. “Specifically, until now Carnival has resisted implying that the Caribbean market has bottomed. On the call, management stated that the second half of 2007 Caribbean occupancy rates is “significantly” higher than last year with pricing trends up from the first half of 2007.”

Mr. Savner said that the bank maintains it “Buy” rating for Carnival shares, based on “our thesis that cyclical trends are improving and valuation remains attractive.”

AG Edwards analyst Tim Conder also noted that fundamentals appear to be at a positive inflection. “Caribbean pricing is stabilizing as the price-value relationship to the consumer has reached a point that is starting to generate incremental demand despite the slowing economy,” Mr. Conder wrote.