Carnival's ( CCL) second-quarter earnings were a shot across the bow, but some say now's not the time to give up on cruise stocks. The company, which operates Holland America, Cunard and Carnival cruise lines, said its second-quarter net income fell 34% to $127.8 million, or 19 cents a share, from $194.2 million, or 33 cents a share, a year earlier. Wall Street analysts had expected 22 cents a share, according to Thomson First Call. Sales rose 35% to $1.34 billion. Carnival predicted third-quarter earnings will be between 83 cents and 87 cents a share, lower than the 93 cents analysts were expecting. Howard Frank, Carnival's vice chairman and chief operating officer, said in the company's conference call: "We can't recall ever being challenged by so many exogenous events affecting our business," referring to the flu virus that spread among cruise ships recently and the Iraq war. "The impact of these events was difficult to estimate, but clearly significant." The company also said earnings were reduced by 2 cents due to litigation charges related to the dual listing of shares after the merger with P&O Princess of Britain, completed in April. Princess's quarterly earnings and sales were responsible for shaving off another cent from Carnival's per-share profit.