Broker snap: Above average yield growth seen at Carnival

8th Oct 2010 09:36

Third quarter results announced last week by Carnival were ahead of Nomura's expectations, prompting the broker to raise full year forecasts for the cruise operator.Nomura has upped its earnings per share forecast for the current year by 5% to $2.47 while the 2011 figure has been jacked up by 10% to $3.00.The 2010 forecast, even after the upgrade, still puts Nomura's figure just below the company's own guidance range of $2.48-$2.52 earnings per share, based on a net revenue yield improvement of 2.5% year on year.However, looking beyond the current year, the broker is more optimistic. "Slower industry capacity growth (3-4% pa from 2012), cyclical recovery in net yield, which remains c7% below its 2008 peak and strong value credentials, together lead us to forecast above-trend net yield growth over the next few years," said Nomura analyst Nicholas Thomas.The stock has, on average, traded at a price/earnings ratio (PER) of 17 over the past 20 year, a 17% discount to the US market's average PER of 20, according to Nomura."However, this discount has closed during periods of above-trend yield growth," Thomas notes. "Given our above-trend yield forecasts, we believe that Carnival should trade at least in line with the US market."The broker rates the shares a "buy" and has a price target for the stock of 3300p.