"If you think filling up an SUV is painful, try footing the bill for a massive 1,000-foot ocean liner -- or in the case of Carnival Corp. (NYSE: CCL), an entire fleet of 84 floating cities," notes value investor Nathan Slaughter.

In his Half-Priced Stocks he explains, "Despite unprecedented fuel costs, the company continues to power forward." Here's his bullish review.

"Last quarter, Carnival shelled out $530 per metric ton for fuel, up sharply from $330 per ton a year ago. And after pumping about 800,000 metric tons, the company rang up a total fuel bill of $425 million.

"For the year, management is expecting fuel costs to come in about $750 million higher than in 2007, which will trim earnings by about $0.92 per share. Fortunately, the company is in a position to absorb those higher costs.

"Over the past three months, two million passengers have boarded a Carnival ship, for an occupancy rate of 104.8% (indicating some berths held more than two guests). And those visitors paid $2.6 billion for their tickets and plunked down another $743 million in the lounges, casinos and gift shops after they arrived on board.

"Combined, those $3.4 billion in quarterly revenues are nearly $480 million (+16.5%) ahead of last year's total. That works out to about $230 in sales from every one of the firm's 14.5 million available berths.

"This key metric, gross revenue yield, continues to rise at a steady clip -- suggesting that management is doing a commendable job of squeezing more and more revenues from its ships.

"Meanwhile, by diligently cutting all non-fuel expenses, net income actually came in at $390 million, or $0.49, a penny ahead of last year. In other words, Carnival has taken just about the worst that can be thrown at it. And not only did it stay afloat, but actually showed a year-over-year gain.

"If the company can tread water during this period of unprecedented fuel costs, then imagine what it can do when operating conditions become a little sunnier. On that front, there are plenty of encouraging signs.

"First, occupancy levels remain above 100% and advance bookings for the next 12 months are tracking as strong as ever -- and at substantially higher ticket prices.

"Furthermore, given the dollar's freefall relative to the euro, Americans looking to visit Europe are increasingly finding cruises to be the most cost-effective way. In fact, Carnival is launching two new ships this month that will be exclusively plying European routes.

"Longer term, cruising continues to gain in popularity, particularly with a weak economy encouraging many travelers to seek out trips that provide more bang for the buck.

"With all-in-one packaging, all-you-can-eat dining and every amenity imaginable for both kids and adults, cruising is actually less expensive than most traditional vacations. The percentage of families coming onboard has doubled over the past six years, and repeat business tends to be high.

"As the dominant leader, no one will benefit from this trend like Carnival. In the meantime, the company is coping with higher fuel costs by tacking on surcharges and tweaking itineraries to replace distant ports of call like Aruba with more accessible destinations.

"Once leisure stocks return to favor, I'm confident that CCL will bounce back strongly. For now, those who take advantage of this pullback can lock in a hefty yield of 4.9%."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.

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Royal Caribbean Cruises Ltd. (NYSE: RCL) recently down $1.03 to $20.31:

RCL is expected to report Q2 EPS in late July. RCL call option volume of 2,789 contracts compared to put volume of 8,808 contracts. RCL July option implied volatility was at 67, August at 74; above its 26-week average of 47 according to Track Data, suggesting larger price movement.

Carnival Corporation (NYSE: CCL) recently down $1.57 to $30.83:

CCL call option volume of 7,827 contracts compared to put volume of 33,198 contracts. CCL July option implied volatility was at 50, August at 58; above its 26-week average of 39 according to Track Data, suggesting larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Best Buy Inc. (NYSE: BBY) beat Q1 estimates as consumers spent their government stimulus checks.
• Carnival Corp. (NYSE: CCL) posted better than-expected Q2 results but offered cautious Q3 guidance.
• Cyberonics Inc. (NASDAQ: CYBX) beat Q4 expectations and offered full-year guidance.
• FactSet Research Systems (NYSE: FDS) had better-than-expected Q3 results and 500 new subscribers.
• General Mills Inc. (NYSE: GIS) raised its full-year guidance, sending shares up near the 52-week high.
• Goldman Sachs Group Inc. (NYSE: GS) results beat the previous quarter and analysts' estimates.
• John Wiley & Sons Inc. (NYSE: JW.A) doubled its Q4 earnings due to an acquisition.
• Life Partners Holdings Inc. (NASDAQ: LPHI) lifted its Q1 outlook after "best quarter" in company history.
• Lindsay Corp. (NYSE: LNN) Q3 profits nearly doubled, but the share price plunged anyway.
• Meade Instruments Corp. (NASDAQ: MEAD) narrowed its full-year net loss due to restructuring.
• Pall Corp. (NYSE: PLL) beat Q1 expectations on sales growth that was broadly based across markets.
• Titan Machinery Inc. (NASDAQ: TITN) beat Q1 estimates on strong demand for agricultural equipment.
• Vermont Pure Holdings Ltd. (AMEX: VPS) posted strong Q2 results despite a bad debt write-off.
• Western Union Co. (NYSE: WU) said 2008 profits would beat estimates and announced share buyback.

More earnings highlights from this week: Morgan Stanley, FedEx, Ford, GE, Circuit City and others

Also, BusinessWeek likes the earnings prospects for agricultural stocks such as Archer Daniels Midland (NYSE: ADM), Monsanto (NYSE: MON), and Deere & Co. (NYSE: DE).

Upcoming results to watch for include Walgreen (NYSE: WAG), Kroger (NYSE: KR), Bed Bath & Beyond (NASDAQ: BBBY), General Mills (NYSE: GIS), Monsanto (NYSE: MON), Nike (NYSE: NKE), Oracle (NASDAQ: ORCL), Research in Motion (NASDAQ: RIMM), ConAgra (NYSE: CAG), Discover (NYSE: DFS), McCormick (NYSE: MKC), Rite Aid (NYSE: RAD:), and KB Home (NYSE: KBH).

Visit AOL Money & Finance for more earnings coverage.

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Carnival Corp. (NYSE: CCL), a provider of cruise vacations and competitor of Royal Caribbean (NYSE: RCL), issued its Q2 earnings numbers on Thursday. Revenues rose more than 16% to $3.4 billion. Net earnings were 49 cents a share. That wasn't too impressive, considering that it was a penny better than the previous year's quarter. However, according to Briefing.com, Carnival killed the earnings expectations of analysts by 8 cents. Net sales were also higher than what Wall Street's expectations.

This performance sent the stock up more than 5%. I think investors need to be a little careful here because Carnival's management has become cautious about the next quarter because of energy costs. The company expects earning of $1.56 to $1.58 per share in Q3. Last year's Q3 saw bottom-line income of $1.67 per share. So, growth will not be found in next quarter's report.

Yet, again, the market didn't seem to mind, as it was high off the expectations-beating data. Is Carnival, therefore, a buy? Well, I don't think it's overly expensive considering the P/E ratio and the yield attached to the stock. But the direction of oil prices has me concerned. Not only will that increase costs for Carnival, but it will compete with the discretionary dollars of potential vacationers. I see the valuation case, but the current state of the market makes me reluctant to pull the trigger on this stock. Some would argue that all this is baked into the shares since they did so well yesterday, but I'm not convinced.

Disclosure: I don't own any company mentioned here; positions can change at any time.

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Carnival (NYSE: CCL) is scheduled to report Q2 EPS on June 19. CCL closed at $36.22 Monday, near 54-month low. CCL June 35 straddle is priced at $2.35. CCL July option implied volatility of 41 is above its 26-week average of 36 according to Track Data, suggesting larger price movement.

Circuit City (NYSE: CC) is scheduled to report Q1 EPS on June 19. CC closed at $4.31 Monday. CC June 5 straddle is priced at 90c cents. CC over all option implied volatility of 78 is near its 26-week average according to Track Data, suggesting non-directional price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Before the bell: As oil resumes rally, stocks set to decline

Workers at U.S. auto parts maker American Axle & Manufacturing Holdings (NYSE: AXL) are set to return to work next week after approving a new four-year contract that contains steep pay cuts and other concessions. The three-months strike crippled crippled production at a General Motors (NYSE: GM) plant.

Six Flags Inc. (NYSE: SIX) said it will cut ticket prices by $10 at its St. Louis park as customers are cash strapped these days due to the tightening economic conditions and rising prices for everyday commodities. Meanwhile, Fitch Ratings downgraded some of Six Flags Inc.'s ratings and put them on Ratings Watch Negative due to a proposed notes exchange.

UAL Corp. (NYSE: UAUA) unit United Airlines and US Airlines Group (NYSE: LCC) are postponing the launch of new China routes because of high fuel costs after gaining approval for this coveted route only a few months ago.

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After hitting a one-year high of $52.10 in October, the stock hit a one-year low of $36.10 in March. This morning, CCL opened at $39.29. So far today the stock has hit a low of $38.95 and a high of $39.81. As of 12:55, CCL is trading at $39.12, down $1.19 (-3.0%). The chart for CCL looks deteriorating slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a June bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in two months as long as CCL is below $45 at June expiration. Carnival would have to rise by more than 15% before we would start to lose money. Learn more about this type of trade here.

CCL hasn't been above $45 since December and has shown resistance around $42.50 recently. This trade could be risky if the company's earnings (due out in mid-June) are a positive surprise, but even if that happens, this position could be protected by the high cost of fuel, which should weigh down this stock.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in CCL.

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• PDUFA date for Solvay S.A. (ADR) (OTC: SVYSY)'s standard supplemental New Drug Application, or sNDA, for AndroGel PD for the treatment of adolescent male Constitutional Delay in Growth and Puberty (CDGP); for which they are requesting pediatric exclusivity.
• Alpharma, Inc. (NYSE: ALO) to give 2008 financial outlook update at 8:30am.
• Eaton Corporation (ETN) to report Q1 earnings; conference call at 10:00am.

• PDUFA date for GlaxoSmithKline plc (ADR) (NYSE: GSK) and Pozen Inc. (NASDAQ: POZN)'s Trexinet, which has priority for 1st-line therapy for acute migraines.
• PDUFA date for Sciele Pharma Inc. (NASDAQ: SCRX) and Novo Nordisk A/S (ADR) (NYSE: NVO)'s PrandiMet for non-insulin dependent Diabetes Mellitus/Type 2 Diabetes treatment.
• Johnson & Johnson (NYSE: JNJ) to report Q1 earnings; conference call at 8:30am.
• Intel Corporation (NASDAQ: INTC) to report Q1 earnings; conference call at 5:30pm.

• San Francisco Fed Bank President Yellen to speak on the Economic Outlook in San Francisco at 11:45am.
• International Business Machines Corp. (NYSE: IBM) to report Q1 earnings; conference call at 4:30pm.
• eBay Inc. (NASDAQ: EBAY) to report Q1 earnings; conference call at 5:00pm.

• FERC Opening Commission Meeting to be held at 10:00am.
• Continental Airlines (NYSE: CAL) to report quarterly earnings; conference call at 10:30am.
• Google, Inc. (NASDAQ: GOOG) to report Q earnings; conference call at 4:30pm.

• Citigroup Inc. (NYSE: C) to report Q1 earnings; conference call at 8:30am.
• Caterpillar Inc. (NYSE: CAT) to report Q1 earnings; conference call at 11:00am.

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After hitting a one-year high of $52.10 in October, the stock hit a one-year low of $36.10 last month. CCL opened this morning at $41.06. So far today the stock has hit a low of $41.06 and a high of $43.00. As of 11:50, CCL is trading at $42.70, up $2.22 (5.5%). The chart for CCL looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $35 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just 7 weeks as long as CCL is above $35 at May expiration. Carnival would have to fall by more than 17% before we would start to lose money. Learn more about this type of trade here.

CCL hasn't been below $36 at all in the past year and has shown support around $37 recently. This trade could be risky if crude oil prices (and fuel costs) continue to rise, but even if that happens, this position could be protected by the support the stock might find around $36, where it bottomed out twice in the past few months.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in CCL.

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Before the bell: Futures rise following Oracle's earnings; ahead of data

Following the new emission laws, General Motors (NYSE: GM) said the law could "hamper muscle cars." Also, the Wall Street Journal reported that GM may sell its medium-duty truck unit to Navistar International.

Tribune Co. (NYSE: TRB) is bracing for the "Sam Zell era" as he is set to take the ailing newspaper and TV company private with the expected closing of his $8.2 billion buyout as soon as Thursday.

According to Think Secret, Apple Inc. (NASDAQ: AAPL) and Think Secret have settled their lawsuit in a confidential, "amicable" settlement. While no sources were revealed, Think Secret will no longer be published. Bloggers lament ThinkSecret: TUAW and Engadget -- if this is true, I wonder if Apple made the right move.

Research In Motion (NASDAQ: RIMM) is expected to post earnings of 62 cents a share in the third quarter. Cruise operator Carnival Corp. (NYSE: CCL) is also scheduled to report earnings today.

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MOST NOTEWORTHY:

• Kaufman Bros. initiated Atmel (NASDAQ: ATML) with a Buy rating and $6 target, as they believe the company's increasing focus around its core microcontroller business can drive an improved growth and profitability profile going forward and would be buyers at current levels.
  
• The firm also started shares of Skyworks (NASDAQ: SWKS) with a Buy rating and a $10 target, as they like the company's balanced customer positioning and find the stock attractively valued at current levels.
  
• JP Morgan initiated Alcatel-Lucent (NYSE: ALU) with an Overweight rating and believes the risks are more than fully priced into shares at current levels.
  
• Parexel (NADSAQ: PRXL) was initiated with a Neutral rating at Broadpoint, as they believe the company's improved execution is already priced into shares.
  
• Deutsche Bank finds shares of Map Pharmaceuticals (NASDAQ: MAPP) attractively valued given the opportunity from the company's two late stage product candidates, UDB and Tempo Migraine. The firm started shares off with a Buy rating and $19 target.

• Wachovia initiated coverage of leisure stocks, starting shares of Carnival (NYSE: CCL), Cedar Fair (NYSE: FUN) and Royal Caribbean (NYSE: RCL) with Outperform ratings.
  
• Credit Suisse initiated PepsiCo (NYSE: PEP) and Coca-Cola (NYSE: KO) with Outperform ratings and targets of $87 and $68, respectively.

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MOST NOTEWORTHY:

• JP Morgan upgraded shares of Advance Auto Parts to Neutral from Underweight citing increased confidence in the company's turnaround efforts.
• Solectron was upgraded to Neutral from Underperform at Credit Suisse to reflect the company's acquisition by Flextronics International (NASDAQ: FLEX).
• Carnival was upgraded to Strong Buy from Outperform and Royal Caribbean was upgraded to Outperform from Market Perform at Raymond James.

• BHP Billiton Ltd (NYSE: BHP) was upgraded to Buy from Hold at Citigroup on valuation and their expectations for higher commodity prices.
• Matrix USA upgraded shares of Callaway Golf Company (NYSE: ELY) to Hold from Strong Sell, as the firm believes growing demand for new products is driving positive fundamental trends.
• Lehman upgraded Dow Chemical (NYSE: DOW) to Overweight from Equal Weight, citing the potential for an accretive acquisition of buyback.

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MOST NOTEWORTHY:

• Citigroup downgraded shares of Circuit City Stores NYSE: CC) to Hold from Buy and lowered their target to $17 from $26 following management's second guidance cut in one month; the firm thinks there is more bad news to come. The electronics-retailer was also downgraded to Market Perform from Outperform at Raymond James and to Neutral from Buy at Robinson Humphries. Circuit City was cut to Sell from Hold at Soleil.

• UBS downgraded six airline stocks on fuel price concerns and their belief that demand may fall as economic growth slows in the domestic market. Downgrades are as follows: AMR Corp. (NYSE: AMR), UAL Corp. (NASDAQ: UAUA) and U.S. Airways Group (NASDAQ: LCC) were downgraded to Reduce from Buy; Southwest Airlines Co (NYSE: LUV) and Continental Airlines (NYSE: CAL) were downgraded to Neutral from Buy; JetBlue Airways Corp (NASDAQ: JBLU) was downgraded to Reduce from Neutral.

• General Electric (NYSE: GE) was removed from Goldman Sachs' Americas Conviction Buy list on valuation.

• Prudential expects Sprint Nextel Corp's (NYSE: S) company-specific problems to continue and weigh on shares and downgraded the phone-giant to Underweight from Neutral.

• Banc of America downgraded shares of LSI Corp (NYSE: LSI) to Neutral from Buy.

• Buckingham cut Best Buy Co (NYSE: BBY) to Neutral from Strong Buy.

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