Third quarter results announced last week by Carnival (NYSE : CCL) 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.
CCL.L @ 3:15PM 2,576.00 p 
£3.48 0.12% - this leaves a potential upside of 724p to reach the target or 28.10%
£3.48 0.12% - this leaves a potential upside of 724p to reach the target or 28.10%
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