Zacks Analyst Blog Highlights: Volcom, Pacific Sunwear, Carnival Corporation and Royal Caribbean

Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Volcom, Inc. (Nasdaq: VLCM), Pacific Sunwear (Nasdaq: PSUN), Carnival Corporation (NYSE: CCL) and Royal Caribbean (NYSE: RCL).

See the latest posts to the Analyst Blog by visiting: http://at.zacks.com/?id=2673

Here are highlights from Wednesdays Analyst Blog:

Volcom in a Good Niche

Volcom, Inc. (Nasdaq: VLCM) has an impressive sales growth record. Continued distribution channel expansion, both domestically and internationally, along with a strong new-product effort should support Volcoms 36% sales growth rate. Managements decision to bring the European franchise in-house has had positive results. In the first quarter of operation, the European business generated strong revenues.

In addition, in the third quarter of 2007, the company reported revenues at the top end of expectations and a $0.03 positive earnings surprise. The stocks weakness due to lower sales to Pacific Sunwear (Nasdaq: PSUN) is providing a buying opportunity.

The stock has only a 30-month trading history without any historical P/E data as a taxable corporation; nevertheless, the stock has traded in a wide P/E range of 16 to 41. The high-end P/E reflects the companys high sales growth profile with sales having grown at a 36% compound annual growth rate (CAGR) from 2001 to 2006.

In addition, the company provides exposure to an attractive high-growth specialty apparel niche. The low P/E represents investor concern over declining sales to the companys largest customer, Pacific Sunwear. However, the companys overall sales growth remains above the five-year CAGR of 36%. The rating is a Buy. The target price is $41.00 or 30 times our year-end EPS estimate.

Modest Upside for Carnival

We maintain our Hold rating for Carnival Corporation (NYSE: CCL) following the release of fourth quarter financial results. We expect Carnival to continue to trade at a premium to its largest competitor over the near-term. However, given our expectation for flat operating margins and continued pricing pressure in the Caribbean, we do not feel that further material price appreciation is warranted at this time.

Accordingly, we continue to prefer the valuation of Royal Caribbean (NYSE: RCL) at current levels. Carnival has historically traded at a slight premium to Royal Caribbean, based on forward price to earnings multiples. This relationship still holds, based on current prices and our forward 12-month EPS estimates for both companies.

While Carnival Corporation is trading at 14.2x estimated 2008 earnings, Royal Caribbean is currently trading at 12.5x estimated 2008 EPS. We expect Carnival to continue to trade at a premium over the near-term. As such, our six-month target price of $46.50 is based on a multiple of 15x expected 2008 earnings.

See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2645.

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