Carnival CorporationCCL

Morningstar Rating

Stock Research and Analysis

by Warren Miller

Carnival is the largest competitor in an industry that benefits from scale advantages. There are significant barriers to starting a cruise line, preventing additional competition and leaving Carnival with a narrow moat. The long-term prospects for this Read more

Bulls Say

Carnival owns some of the most well-known and respected cruise brands, making it an obvious choice for both novice and experienced cruisers.

Cruise industry dynamics are improving as the elderly population and cruise awareness continue to grow.

Compared with other types of vacations, cruises have the highest customer satisfaction and are a relative bargain for many vacationers. This solid product with low penetration should flourish under good management.

Carnival paid out 39% of operating cash flow in dividends in 2008, resulting in a 6.7% dividend yield at our fair value estimate. Read more

Bears Say

A lack of fuel hedging will cause Carnival's free cash flow to suffer quickly if fuel prices rise substantially.

Weather or acts of terrorism could prove to be a significant deterrent of potential cruise vacationers.

Scale benefits give cruise companies the incentive to constantly increase capacity. If the industry expands too quickly, excess capacity could hurt profitability. Read more

Strategy

Despite already being the largest cruise operator, Carnival plans to add 22 new and bigger ships to its fleet during the next five years, representing a 36% increase in capacity. These ships will be Read more

Management

Micky Arison leads Carnival as its CEO and chairman. His father, Ted Arison, founded the company in 1972, and Micky started at the bottom and quickly rose through the ranks, becoming CEO in 1979 and chairman in 1990. We believe the management team is Read more

Profile

Carnival is the largest cruise operator in the world and generated more than $14 billion in revenue in 2008. The company's 91 ships take passengers to destinations around Read more

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