<p style="text-align: justify;"><span style="font-size: small;"><strong>Carnival Corp. </strong>reported fiscal 2010 second quarter earnings of 32 cents per share, which slightly exceeded the Zacks Consensus Estimate of 30 cents but dipped from the year-earlier earnings by a penny. Below we will cover the results of the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for the short term and long term outlook for the stock.</span></p>
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<div style="text-align: justify;"><span style="font-size: small;"><strong>Earnings Report Review</strong></span></div>
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<div style="text-align: justify;"><span style="font-size: small;">Net revenue in the quarter spiked 10.3% year over year to $3.2 billion, with net revenue yield at current dollar prices increasing 2.4% from the prior-year quarter, largely due to a favorable foreign exchange rate. On a constant currency basis, net revenue yield upped 2.0% from the prior-year quarter, in line with the upper end of the guidance provided by the company. Carnival&rsquo;s gross revenue yields increased just 0.4% in current dollars, because of lower air transportation revenues.</span></div>
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<div style="text-align: justify;"><span style="font-size: small;">(Read our full coverage on this earnings report: Carnival Beats Zacks Estimate)</span></div>
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<div style="text-align: justify;"><span style="font-size: small;"><strong>Earnings Estimate Revisions &ndash; Overview </strong></span></div>
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<div style="text-align: justify;"><span style="font-size: small;">Following the release of Carnival&rsquo;s second quarter results, estimate revision trends among the analysts depict a negative outlook for the upcoming quarters. Let&rsquo;s dig into the earnings estimate details.</span></div>
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<div style="text-align: justify;"><span style="font-size: small;"><strong>Agreement of Estimate Revisions</strong></span></div>
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<p><span style="font-size: small;"><img src="http://www.zacks.com/images/upload_dir/1277742083.jpg" border="0" /></span></p>
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<div style="text-align: justify;"><span style="font-size: small;">Over the last 7 days, 8 of the 13 analysts covering the stock made downward earnings estimate revisions for the fiscal 2010 third quarter. A similar downward trend is noticed for both the fourth quarter and fiscal 2010, with estimates having been lowered by 7 and 6 out of 14 and 15 analysts, respectively. On the other hand, upward revisions in estimates were made for the upcoming two quarters and fiscal 2010 by 1, 3 and 2 analysts, respectively.</span></div>
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<div style="text-align: justify;"><span style="font-size: small;">Over the last 30 days, estimates for Carnival were lowered by most of the analysts, while upward revisions have been fewer. This indicates a negative bias of the analysts on the company.</span></div>
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<div style="text-align: justify;"><span style="font-size: small;">However, there is no clear directional movement for fiscal 2011 over the last 7 days with 5 out of 19 analysts increasing their estimates, and 5 decreasing the same.</span></div>
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<div style="text-align: justify;"><span style="font-size: small;">The analysts, by and large, are mainly concerned about the rise in fuel prices. The second quarter 2010 earnings of the company were marred by rising fuel prices year over year. Management expects this trend to continue for the remaining of 2010, costing an additional $440.0 million, or 55 cents per share, thereby driving overall costs up to the range of 1.0% to 2.0% in current currency.<span>&nbsp;&nbsp; </span></span></div>
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<div style="text-align: justify;"><span style="font-size: small;">Although the pricing trend is improving for Carnival on the back of a recovery in consumer demand outpacing supply growth, Carnival expects its third quarter pricing to remain flat in Europe due to the 8% increase in capacity for its European branded fleet.</span></div>
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<div style="text-align: justify;"><span style="font-size: small;">Additionally, the adverse effect of economic uncertainty, fewer guests purchasing their air travel tickets through Carnival owing to lower air transportation revenues, and a greater-than-expected slowdown in the European economies compelled the analysts to slash their estimates.&nbsp;</span></div>
<div style="text-align: justify;"><span style="font-size: small;">&nbsp;</span></div>
<div style="text-align: justify;"><span style="font-size: small;">However, the analysts&rsquo; outlook remains comparatively favorable on fiscal 2011 based on higher capacity growth guidance and an expected rebound in economy.</span></div>
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<div><span style="font-size: small;"><strong>Magnitude of Estimate Revisions</strong></span></div>
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<span style="font-size: small;">The magnitude of estimate revisions for Carnival has been quite significant over the last 7 days. Following the release of second quarter results, estimate for the next quarter has been lowered by 6 cents ($1.46 from $1.52). Carnival&rsquo;s estimates for fiscal 2010 and fiscal 2011 have been decreased by 2 cents.&nbsp;</span>
<p><span style="font-size: small;"><img src="http://www.zacks.com/images/upload_dir/1277742110.jpg" border="0" /></span></p>
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