Caribbean Weakness, Fuel Prices Will Have Impact on Carnival, Analyst Says

In advance of Carnival Corp.’s second quarter 2007 earnings call on June 19, Bank of America analyst Michael Savner said that Carnival’s results would “reflect current weakness in the Caribbean”.

Mr. Savner said that higher fuel prices will also contribute to a net second quarter yield decline for the cruise line, noting that Carnival does not hedge its fuel costs, and that per his calculation, average fuel prices this quarter are tracking roughly 8 percent higher than the guidance of $315 per ton.

Mr. Savner pointed to the bank’s travel agent survey from May, which indicated that pricing trends for the Caribbean remained soft as prices overall dropped for both Carnival and Royal Caribbean Cruises. He forecasted a net yield decline of 0.2 percent in the second quarter, expecting net yields to improve in the second half of 2007.

Mr. Savner maintained a Buy rating for Carnival shares, and said that “Although trends have yet to improve meaningfully, we think the stocks already reflect current market conditions.”