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Why Carnival (CCL) Is Up Today

NEW YORK (TheStreet) -- Shares of Carnival (CCL - Get Report) rose following a positive earnings report and upgrades from Credit Suisse and UBS.

The cruise company posted adjusted fourth-quarter earnings of 4 cents a share, higher than the company's guidance range of a loss of 3 cents a share and earnings of 3 cents. Total revenue for the quarter was $3.659 billion,  a 2.2% increase year over year.

Following the earnings report, Credit Suisse upgraded Carnival to "outperform" from "neutral. Analyst Joel Simkins wrote that "it appears that CCL is making some positive steps towards a business transformation," following the arrival of new CEO Arnold Donald. Credit Suisse now lists a target price of $43 for Carnival.

UBS upgraded Carnival to "buy" from "neutral. I's target price for the stock is now $41. Analysts Robin Farley and Arpine Kocharyan noted that double-digit yield increases for the Costa brand were the "biggest upside" of the earnings call. Costa is the brand that operated the Concordia cruise ship that partially sank off the coast of Italy in January 2012.

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Shares of Carnival rose 1.3% to $38.54 in early trading on Friday.

TheStreet Ratings team rates CARNIVAL CORP/PLC (USA) as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about its recommendation:

"We rate CARNIVAL CORP/PLC (USA) (CCL) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CCL's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 0.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.25 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 41.98% is the gross profit margin for CARNIVAL CORP/PLC (USA) which we consider to be strong. Regardless of CCL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CCL's net profit margin of 19.76% compares favorably to the industry average.
  • The change in net income from the same quarter one year ago has exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income has significantly decreased by 29.8% when compared to the same quarter one year ago, falling from $1,330.00 million to $934.00 million.

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