Zacks Analyst Interview Highlights: Royal Caribbean and Carnival.

Zacks.com releases the latest Analyst Interview. Todays interview is with senior analyst Sean P. Smith, who discusses Royal Caribbean (NYSE: RCL) and Carnival (NYSE: CCL).

A synopsis of todays Analyst Interview is presented below. The full article can be read at www.zacks.com.

Many people take their getaway vacations in the first few months of a year. Is this a good time for cruise lines, or are economic concerns expected to put the squeeze on cruise line revenues this year?

Actually, the first calendar quarter of the year is traditionally a relatively weak period for cruise lines from a revenue and earnings standpoint. For Royal Caribbean (NYSE: RCL), for example, the first calendar quarter historically produces approximately 60% of its annual revenues during the second and third fiscal quarters, with the remaining 40% roughly evenly split between the first and fourth quarters.

However, the first calendar quarter does hold important significance for the cruise companies in terms of forward bookings. More than a third of annual cruises are booked between mid-January and March, and as such, the cruise companies typically have the greatest success in implementing price increases during this period. The extent to which current economic conditions will impact pricing this season remains to be seen, but in general the cruise companies are experiencing relatively solid pricing power.

What about earnings season for this group? Was 2007 an overall favorable year?

In general, the cruise companies posted moderately higher gains in earnings during 2007. Carnival (NYSE: CCL) posted growth in earnings per share of approximately 7%, while we expect Royal Caribbean to post earnings growth of approximately 3%, excluding the impact of a beneficial lawsuit settlement in 2006. We note that 2007 earnings growth fell far short of revenue growth, due to increased expenses during the year, including a significant increase in fuel costs.

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