Carnival Corp. (NYSE:CCL) reported 4th quarter and year end results yesterday and I thought a fun topic like cruise ships would be an interesting way to finish the week. With Carnival Corp. one thinks of Carnival Cruise Lines, but the corporation owns 10 different cruise lines according to their website. Since vacation travel is discretionary spending, a glimpse of what Carnival management sees for the future can give us a look at consumers and the economy.

I had not taken a close look at Carnival before this and I was impressed with the size of the company. $19 billion market capitalization and they generated $2.3 billion in net income off of $14.6 billion in revenues for 2008. This puts them in the same size range of Federal Express (NYSE:FDX), EBay (NASD:EBAY), Time Warner Cable (NYSE:TWC) and Yahoo (NASD:YHOO). Carnival, however, manages to generate significantly more net income than the stocks listed here.

A quick look at the 2008 numbers before we look into the crystal ball. Revenues for 2008 were 12% higher than for 2007 but net income was off 3.2%. Net earnings per share for 2008 were $2.90. The biggest factor in the falling bottom line was the fact that Carnival paid $680 million or 55% more for fuel due to the high oil prices for much of 2008. During the 4th quarter Carnival sold the Queen Elizabeth II for a $32 million profit, which was included in the quarter's numbers. Investors earn a $1.60 per share in dividend during 2008, but the company has suspended the dividend for 2009 to conserve cash in these difficult economic times.

During the earnings conference call Carnival management spent 10 minutes on the recent results and 14 minutes on the outlook for 2009. Here are some of their thoughts on 2009 that I believe are important. The company will add several new ships in 2009, increasing capacity by 5.5% but they are forecasting revenue to fall 11% to 15%. Net income per share guidance for 2009 is $2.25 to $2.75. Bookings for the 1st three quarters of 2009 are significantly below 2008 at lower average prices. The lower prices are due to the recent elimination of the fuel surcharge. It was noted that bookings on the more economy cruise lines were stronger than on the luxury and long distance cruises. Carnival is definitely preparing itself for a much slower coming year.

Three factors can have a significant effect on the actual revenues and earnings for Carnival during the coming year. First, a new administration and prompt actions to help the economy may boost consumer confidence and push up last minute cruise bookings. Second, fuel prices have a profound effect on the bottom line. The company is using a forecast of $295 per ton for bunker fuel next year. A 10% change in either direction from this number will change earnings by 12¢ per share. Right now bunker fuel is closer to $200 per ton. Third, exchange rates have a great effect since half of the company's customers buy in foreign currency. A weakening dollar is a benefit to the bottom line. The 2009 guidance is base on the euro at $1.38 and the pound sterling at $1.53. A 10% change in exchange rates will affect the bottom line by 17¢ per share.

The best possible world for Carnival Corp is consumers who think better times are here or coming, low oil prices and a weak dollar. Two out of three would probably allow the company to beat their own guidance. I would wait until the quarterly earnings look strong enough that a resumption of the dividend is imminent. At this point in their business cycle Carnival Corp. is a more interesting company to take a vacation with than to own.