Broker snap: Carnival on course

23rd Jun 2010 09:33

The second quarter update from cruise operator Carnival was about what Nomura Securities was expecting, though earnings per share were a little above company guidance."2Q EPS [second quarter earnings per share] of $0.32 driven by net yield growth of 2% compared with guidance of $0.26-$0.30 and 1-2% respectively," Nomura analyst Nicholas Thomas observes.The broker is forecasting a period of above-trend net yield growth, somewhere around 3% per annum, "driven initially by cyclical recovery following a 9% decline in 2009, and subsequently by a reduction in industry capacity growth from c9% pa historically to 3-4% pa from 2012."Thomas said the change in emphasis from capacity driven volume growth towards like for like revenue growth should be reflected in higher margins, return on investment capital and cash flow.Meanwhile the effect of the dollar's strength against the euro and sterling should be offset by lower fuel and other costs, the broker predicts.The broker, which has a "buy" recommendation on the stock and a price target of 3330p, regard "Carnival as a genuine growth company with an industry-leading market position and a model that we believe is long term value accretive."