Carnival's (CCL) fourth-quarter results show the company continues to benefit from robust demand for cruise vacations. Revenue grew 9% from the fourth quarter of 2009 as a result of a 5% increase in capacity, a 50 basis-point increase in occupancy, and a 4% increase in ticket prices. This is Carnival's fourth 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 50 basis points, to 10%.
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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