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Carnival Is Cruising Along Long-Term

Despite company commentary suggesting that yield growth is slowing, nothing warranted imminent concern about Carnival's ability to drive demand creation or manage its cost structure.


In our opinion, there were no metrics that warranted imminent concern about Carnival’s ability to drive demand creation or manage its cost structure. Our long-term yield outlook incorporates 2% average yield increases, above the flattish pace the company has been able to capture over the past decade, as we expect that improved revenue-management strategies and systems should lead to structurally higher yield grab than in the past. We have costs rising more than 1% on average, versus the flattish pace they have maintained on an as-reported basis over the past decade, as fuel and foreign exchange can weigh on the overall metric and have real impacts on cash flows. We expect these metrics add a normalized perspective to Carnival’s earnings power, adjusting for the cyclical silo that it operates within.

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