Foolish Forecast: Carnival Ready to Cruise

Judging by new all-time highs in oil prices, cruise line operator Carnival (NYSE: CCL  ) (NYSE: CUK  ) could soon be seeing further turbulence in its earnings results. Fuel costs are clearly a significant influence on its operations as it must propel giant ships across the seven seas. Fools will know tomorrow whether costs rose enough to offset Carnival's expansion across the globe, as the company is set to release third-quarter results.

What analysts say:

• Buy, sell, or waffle? Nineteen analysts currently follow Carnival; 10 are bullish on the stock, eight are on the fence with hold ratings, and one recommends you cruise elsewhere. The Motley Fool CAPS community has given three stars (out of five) to Carnival.
• Revenues. Analysts are projecting $4.33 billion in second-quarter sales, or 10.9% above last year's sales amount.
• Earnings. Analysts expect quarterly earnings of $1.62, or 8.7% ahead of last year's figure.

What management says:
Back when Carnival announced second-quarter results, management said it expected third-quarter earnings of $1.60-$1.62. Higher fuel costs caused it to lower full-year guidance by $0.12 per share to $2.85-$2.95. Carnival expects net revenue yields (an industry metric measuring daily net income per passenger) to grow about 1% for the full year, as net cruise costs grow 2%-3%.  

What management does:
Carnival has a five-year track record of growing sales and earnings more than 20% annually. Operating cash flow grew 24% each year over this time frame, and while most of this is reinvested to maintain and grow its ship fleet, there is still plenty left over to pay a 3.2% dividend yield and buy back stock.

Margins	02/06	05/06	08/06	11/06	02/07	05/07
Gross	45.7%	45.2%	44.8%	45.3%	44.9%	44.8%
Operating	23%	22.6%	22.2%	22.1%	21.7%	21.4%
Net*	19.3%	19%	19%	19.2%	19.2%	18.9%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Based off current company guidance, shares of Carnival are trading at about 16 times forward earnings, which is reasonable given its reputation for double-digit growth and continued compelling growth prospects for the industry.

Carnival is also considerably larger than its closest peer, Royal Caribbean (NYSE: RCL  ) , and while both are growing sales and earnings nicely, Carnival is much more profitable than its archrival. Both collectively dominate the cruise line space, with only smaller regional players to contend with and Walt Disney's (NYSE: DIS  ) small handful of ships. Steiner Leisure (Nasdaq: STNR  ) operates a number of spas on cruises, but the majority of industry spoils will likely continue to wash over to Carnival and Royal.  

Strap on your life jacket and come aboard to read about Carnival's past:

• Carnival sailed into 2007.
• In March, the company entered world wide waters.
• But fuel prices dampened it's party last quarter.