Deutsche Bank Upgrades Carnival Corp To Buy On Cost Control, 'Strengthening' Pricing Environment

In a report published Monday, Deutsche Bank analyst Richard Carter upgraded the rating on

from Hold to Buy, while raising the price target from $55.00 to $55.30. The company is expected to post its Q2 earnings above the high end of its guidance range. The analyst also expect the company to report further recover in pricing and bookings, along with better operational momentum for its core Carnival brand. The Q2 EPS is expected to rise, year-on-year, driven by continued operational efficiencies benefits, as well as lower fuel costs. The analyst also expects Carnival to witness 7 percent EPS growth in Q3, driven by an increase in constant dollar net yield, along with a decline in net cruise costs per (ex fuel) ALBD. There is also likely to be upside to the FY15 EPS, with FX remaining fairly stable since the guidance was issued. "However, we believe further cost control measures and a strengthening pricing environment will see the group take EPS guidance up 2-3 percent to consensus," the Deutsche Bank report said. The FY15 and FY16 EPS estimates have been raised, driven by favorable FX impact in 2015 and lower cost in 2016 due to translational FX and decreased fuel hedging losses.