) --


(CCL) - Get Report

shares jumped Tuesday morning after the cruise ship operator beat earnings expectations and forecast profits ahead of Wall Street's call.

Carnival said its 28.5% jump in year-over-year profits reflected an improving economy and lower fuel costs.

Carnival Cruise Line vessels Sensation and Ecstasy

Carnival forecast 2011 earnings per share in a range of $2.90 to $3.10. Analysts' consensus call was for EPS of $2.92.

Carnival shares jumped 3.2% to $44.62 in morning trading on heavier-than-average volume. Nearly 4 million shares changed hands just ninety minutes into the session, compared with their average daily trading volume of 3.5 million.

HSBC Global Research analyst Ben O'Toole recently initiated coverage of Carnival and rival

Royal Caribbean

(RCL) - Get Report

. He opened coverage on Carnival with an overweight rating and $51 price target. The analyst gave Royal Caribbean a neutral rating and $43 price target.

O'Toole noted that demand for cruises has been improving, especially in Europe, and that the operators are further helped by slow supply growth.

"We are also optimistic that costs can be controlled and that, as both operators increase in size, further efficiencies can be achieved, leading to margin expansion," he noted.

Carnival's fiscal first quarter earnings were forecast in a range of 15 cents to 19 cents per share, down from fiscal 2010 first quarter EPS of 22 cents.

For the recent quarter, Carnival booked fiscal fourth quarter profits of $248 million, or 31 cents per share, up sharply from year-earlier earnings of $193 million, or 24 cents per share.

Revenue in the three months ended Nov. 30 grew 6.6% to $3.5 billion, from $3.28 billion in the fourth quarter last year.

Results beat analysts' consensus call for earnings of 31 cents per share on revenue of $3.36 billion.

The operator of Carnival Cruise Lines, Princess Cruises and Costa Cruises, among others, forecast a 3% to 4% increase in constant dollar net revenue yields for the full year 2011.

"Booking trends have continued to improve for both our North American and European brands, particularly for our peak summer season," said CEO Micky Arison. "We are optimistic these positive trends are an indicator of a strong wave season, our heaviest booking period which begins in early January."

Cruise ship rival Royal Caribbean saw its shares spike 5.4% to $45.54 Tuesday morning.

Tales of a vacation getaway on a rudderless ship without lights, showers or hot meals haven't held back the share prices of Carnival and Royal Caribbean. The

cruise ship companies' stocks have far outpaced the benchmark S&P 500 Index's 12.3% return this year, with Carnival rising 40.6% and Royal Caribbean up 80.1%.

Consumers loosened their purse strings and took vacations after staying home for the better part of the past two years as unemployment rose. With the economy recovering, North Americans increased bookings, prompting

Goldman Sachs

(GS) - Get Report

to upgrade Carnival to "buy" and increase its share-price target to $44 from $36. Some vacationers opted for cruises because they're relatively cheap and perceived to be safer than the hotspot of Mexico, some of whose cities are plagued by drug-fueled violence.

Carnival is the largest cruise operator in the world, with 90 ships and $14 billion in revenue in 2008. Royal Caribbean is second, with 39 ships and nearly $6 billion in revenue last year.

-- Written by Miriam Marcus Reimer in New York.

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