Yesterday, Carnival reported its Q1 results with diluted EPS of US$0.33 well ahead of the consensus estimate of US$0.19. Tight cost control and lower fuel costs offset the drop in revenues. With two-thirds of capacity booked for the reminder of FY09, management is now guiding a tighter 20c (versus 50c) EPS range, though to a mid-point of US$2.20, down from US$2.50 three months ago. Despite this, we believe Carnival’s more diverse offering, stronger balance sheet and less volatile quarterly earnings profile warrants its premium rating to Royal Caribbean.

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