Carnival's third-quarter results show that the company continues to benefit from robust demand for cruise vacations. Revenue grew 7% from the third quarter of 2009 as a result of a 6% increase in capacity, flat occupancy, and a 3% increase in ticket prices. This is Carnival's third consecutive quarter of year-over-year growth, and we expect this trend to continue as the company's future bookings appear to be growing at a healthy pace. Carnival also kept operating costs in check, and as a result, its operating margin expanded 300 basis points to 32%.
Although consumer sentiment has improved from its trough, there are still many headwinds for cruise companies. Unemployment, rising savings rates, and lower household net worth all discourage consumer spending and depress cruise vacation demand. We expect Carnival to experience slow growth in the near term, and as a result we are leaving our fair value estimate unchanged.
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