Carnival Expects Rougher Waters

As a single economic entity, Carnival Corporation (CCL) & Carnival, Plc (CUK) is the largest cruise operator in the world. Carnival’s cruise ships offer various itineraries to passengers worldwide under leading cruise brands.

We maintain our Hold rating for Carnival Corporation following the release of Q4 financial results. Given our expectation for continuing margin pressures and potential demand weakness, we do not feel that material price appreciation is warranted at this time.

While the recent pullback in the price of fuel should provide some relief, a great deal of uncertainty remains heading into fiscal 2009. The recent dividend suspension has afforded Carnival increased financial flexibility, however. Our six-month target price of $22.50 is based on a multiple of 8.5x expected 2009 earnings.

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