Zacks Analyst Blog Highlights: Volcom, Pacific Sunwear, Carnival Corporation and Royal Caribbean announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Volcom, Inc. (Nasdaq: VLCM), Pacific Sunwear (Nasdaq: PSUN), Carnival Corporation (NYSE: CCL) and Royal Caribbean (NYSE: RCL).

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Here are highlights from Wednesday’s Analyst Blog:

Volcom in a Good Niche

Volcom, Inc. (Nasdaq: VLCM) has an impressive sales growth record. Continued distribution channel expansion, both domestically and internationally, along with a strong new-product effort should support Volcom’s 36% sales growth rate. Management’s decision to bring the European franchise in-house has had positive results. In the first quarter of operation, the European business generated strong revenues.

In addition, in the third quarter of 2007, the company reported revenues at the top end of expectations and a $0.03 positive earnings surprise. The stock’s weakness due to lower sales to Pacific Sunwear (Nasdaq: PSUN) is providing a buying opportunity.

The stock has only a 30-month trading history without any historical P/E data as a taxable corporation; nevertheless, the stock has traded in a wide P/E range of 16 to 41. The high-end P/E reflects the company’s high sales growth profile with sales having grown at a 36% compound annual growth rate (CAGR) from 2001 to 2006.

In addition, the company provides exposure to an attractive high-growth specialty apparel niche. The low P/E represents investor concern over declining sales to the company’s largest customer, Pacific Sunwear. However, the company’s overall sales growth remains above the five-year CAGR of 36%. The rating is a Buy. The target price is $41.00 or 30 times our year-end EPS estimate.

Modest Upside for Carnival

We maintain our Hold rating for Carnival Corporation (NYSE: CCL) following the release of fourth quarter financial results. We expect Carnival to continue to trade at a premium to its largest competitor over the near-term. However, given our expectation for flat operating margins and continued pricing pressure in the Caribbean, we do not feel that further material price appreciation is warranted at this time.

Accordingly, we continue to prefer the valuation of Royal Caribbean (NYSE: RCL) at current levels. Carnival has historically traded at a slight premium to Royal Caribbean, based on forward price to earnings multiples. This relationship still holds, based on current prices and our forward 12-month EPS estimates for both companies.

While Carnival Corporation is trading at 14.2x estimated 2008 earnings, Royal Caribbean is currently trading at 12.5x estimated 2008 EPS. We expect Carnival to continue to trade at a premium over the near-term. As such, our six-month target price of $46.50 is based on a multiple of 15x expected 2008 earnings.

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The performance of the Zacks Rank portfolios shown above for annual and year-to-date periods are the linked monthly total returns (price changes + dividends) of equal weighted hypothetical portfolios, consisting of those stocks with the indicated Zacks Rank, assuming monthly rebalancing and zero transaction costs. These are not the returns of actual portfolios. The hypothetical portfolios were created at the beginning of each month from Jan 1988 forward based on the values of the Zacks Rank available to Zacks’ clients before the beginning of each month. The portfolios created monthly from 1988 through September 2006 exclude ADRs and are comprised of stocks that have the indicated Zacks Rank and were covered by at least two analysts at the time of the stocks inclusion in the portfolio. Starting in October 2006 and going forward, the portfolios are comprised of all stocks with the indicated Zacks Rank and do not exclude ADRs, which is more reflective of the list of stocks that customers will find on the Zacks web sites. 2007 returns are for the period of Jan 1 – Jun 30, 2007. These performance numbers have been audited from 1995 through 2003 by Autschuler Melovan, a division of American Express Financial.