Goldman Sachs Comments On Carnival Corp Following Meeting With Management

The overall tone of the meeting with Carnival's CCL management was positive and Goldman Sachs walked away confident that despite rising fuel prices, the cruise sector continues to show solid fundamentals. With 2011 EPS guidance lowered on Friday, due to the recent spike in oil prices, investor questions were focused on the underlying trends in the business.

Demand is still solid across the board with volume flat and pricing up slightly. Cost cuts undertaken over the last several quarters are permanent in nature and not expected to return with resurging demand. The reduction in travel agent commission in the UK from 15%to 5% is expected to be margin neutral in the near-term and margin accretive for Carnival UK over the longer term as it allows better control over pricing and reduces the cost structure. Free cash generated will be returned to shareholders in the form of share buy-backs and dividend increases especially given the relatively modest planned ship building programs.

Goldman Sachs has a CL-Buy on CCL

CCL closed Monday at $39.86