After years of rapid expansion here at home, cruise-line operator Carnival (NYSE:CCL) (NYSE:CUK) is increasingly looking to Europe and other international ports to keep growth chugging along. The company, which has publicly traded securities both in the U.S. and the U.K., will release second-quarter earnings on Tuesday. Investors will be hoping they won't have to ship out with a repeat of last year's turbulence from hurricane worries and high fuel prices. 

What analysts say:

  • Buy, sell, or waffle? Twenty analysts currently follow Carnival. Ten are bullish, one isn't, and nine can't make up their minds, with a hold rating.
  • Revenue. Analysts are projecting second-quarter sales of $2.9 billion for year-over-year growth of about 9%.
  • Earnings. Analysts project second-quarter earnings of $0.47 per share, a penny above last year's $0.46.

What management says:
Back in March, when Carnival released first-quarter results, it said it expected second-quarter earnings of $0.45-$0.47 per share and net revenue yields to fall between 2% and 3%. For the year, it is calling for earnings of $2.90-$3.10 per share, versus $2.77 for all of 2006.

What management does:
Carnival is surprisingly profitable, given the costs to operate a fleet of 82 gigantic cruise ships, especially considering that high fuel costs are making cruising even more expensive. On average, it has also been able to grow sales, net income, and cash flow in excess of 20% annually over the past five years. Nearer-term trends have been more turbulent, but the long-term potential of this industry leader remains largely intact.

Margin

10/05

01/06

04/06

07/06

10/06

01/07

Gross

46.2%

45.7%

45.2%

44.8%

45.4%

44.9%

Operating

23.8%

23%

22.7%

22.4%

22.6%

22.3%

Net*

20.3%

19.3%

19%

19%

19.2%

19.2%
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:
Carnival and Royal Caribbean (NYSE:RCL) collectively dominate the cruise-line industry. Disney (NYSE:DIS) operates a couple of cruise ships, and Steiner Leisure (NASDAQ:STNR) runs the spas on a number of liners, but other than that, the competition in this space consists of smaller, regional tour operators.

Carnival estimates that North America accounts for more than 60% of all cruise-line passengers as they visit the Caribbean, Mexico, the Bahamas, and Alaska. But after years of capacity growth, international markets are becoming the focus for the bulk of its expansion opportunities. Carnival now operates in Europe, Australia, and New Zealand, and it recently sent a ship to China to start serving the underpenetrated Asian market.

Overall, both Carnival and Royal look to have plenty of open water to cover. Throw in reasonable valuations and respectable dividend yields, and Fools may want to consider using near-term turbulence as an opportunity to take a further look at the industry.

Take to the Foolish seas:

Steiner has been a winning pick in the Rule Breakers newsletter service. If you want to learn more, you can sail all month long on our dime with a 30-day guest pass. See you at the buffet. Disney is a Stock Advisor selection.

Fool contributor Ryan Fuhrmann is long shares of Carnival and Royal Caribbean but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.