After ramping down earnings expectations numerous times throughout 2006, cruise line operator Carnival (NYSE:CCL) was finally able to beat consensus analyst projections.

Carnival reported fourth-quarter and full-year 2006 earnings earlier today. Total fourth-quarter revenue grew 9.2%, net revenue yields increased 2.3%, and diluted earnings grew 24.4%. Net revenue yields are akin to same-store sales for retail companies; they're an industry term that measures "net revenue per available lower berth day."

For the full year, the top line grew 6.7%, and revenue yields increased 1.5%. Diluted earnings advanced only 2.6%, though this topped analyst expectations of $2.73 per share. We already knew that high fuel costs would take a bite out of 2006 earnings, as were fears of hurricanes that kept potential passengers from booking cruises to the vital Caribbean market. Others speculate that higher interest rates and gas prices are reducing the discretionary income that consumers use for vacations and cruises.

Carnival estimated that fuel hit this year's earnings by $0.25 per share, but the company sees fuel consumption costs decreasing slightly during 2007. It also expects the Caribbean market to turn, but did not offer a timeframe during its earnings conference call. Overall, it is currently projecting 2007 diluted earnings of $2.90-$3.10 per share, for growth of almost 10% year over year.

Carnival also has a cruise ship operating in the Chinese market, but it stated that results are running below its expectations, and moved the ship to serve the Hong Kong market. It believes it has the product offering right, but it's working to build up a distribution network and better penetrate the marketplace. In other words, it is still learning, but it plans on sticking around and making further inroads into China as a future growth avenue.

Shares of Carnival have run from 52-week lows reached during overall market malaise in July, which also coincided with record high energy prices. But looking out over the longer term, I find the economics of the cruise industry compelling, since the long-term trend of aging baby boomers should lead to more cruise passengers. Additionally, less than 20% of the domestic population has ever taken a cruise, and the figure is even lower in other countries.

Carnival competes in the space along with archrival Royal Caribbean (NYSE:RCL). Disney (NYSE:DIS) also operates a number of cruise ships, and Steiner Leisure (NASDAQ:STNR) operates the spa services for a multitude of cruising vessels. The high costs of building and maintaining cruise lines keeps other competitors at bay another appealing investment characteristic that helps create an economic moat and above-average growth and profitability for the industry players.

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Disney is a Stock Advisor recommendation, and Steiner Leisure is a Rule Breakers 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.