Moody's Raises Carnival Outlook On Improved Demand, Pricing

29th Jun 2010 20:14

DOW JONES NEWSWIRES Moody's Investors Service raised its ratings outlook on Carnival Corp. (CCL) to stable, saying it expects the cruise-ship company's credit profile to improve gradually due to better demand and higher prices. The ratings agency noted demand for cruises continues to improve, evidenced by stronger booking volumes and slightly higher net revenue yields. Although Carnival's profitability and coverage metrics are strong, they remain weak for the rating category--which is currently A3, four notches into investment-grade territory. But Moody's expects higher cruise pricing to result in a gradual improvement in the company's credit profile over the next year to 18 months. It cautioned, though, that profitability improvement will be constrained by higher fuel costs and the stronger dollar. The company, which runs 11 cruise lines, faces headwinds from currency fluctuations as more than one-third of its capacity comes from Europe, according to analysts at UBS. However, Moody's said capacity expansion will drive total earnings higher. Last week, Carnival reported its fiscal second-quarter profit fell 4.5%, weighed down by higher fuel costs, as the company warned fuel and currency expenses would damp earnings growth for the rest of the year. Still, the company said consumer demand remains strong, and revenue increased 8.4%. Carnival's shares fell 6% to $30.19 in recent trading amid a broad market slump. -By John Kell, Dow Jones Newswires; 212-416-2480; [email protected] (END) Dow Jones Newswires June 29, 2010 15:14 ET (19:14 GMT)