FLORIDA(Bloomberg) — Carnival Corp., the world's largest cruise operator, said second-quarter profit rose more than analysts estimated on increased demand for European travel.Net income climbed 2.6 percent to $390 million, or 48 cents a share, exceeding estimates by one cent. Profit a year earlier was $380 million, or 46 cents, the company said yesterday.

Carnival benefited from higher prices for trips to the Mediterranean and other European destinations, as well as strengthening in the euro and British pound. The company has added ships and extended the sailing season in Europe to blunt sluggish demand in the Caribbean, its largest market.

"Europe and Alaska are helping the company get through the downturn in the Caribbean," said Jason Lisiak, who helps manage more than $15 billion at Manning & Napier Advisors Inc. in St. Petersburg, Florida. "They have broadened their revenue base."

Shares of Miami-based Carnival rose five cents to $49.71 at 4:17 p.m. in New York Stock Exchange composite trading. They have risen 1.3 percent this year. Carnival's lines include Holland America and Cunard, which operates the Queen Mary 2.

Carnival reduced its full-year profit forecast, citing higher fuel prices than it had anticipated.

Earnings will rise to $2.85 to $2.95 a share for the year through November, Carnival said. In March, it predicted profit of as much as $3.10 a share. Analysts estimate $2.99, the average of 20 projections compiled by Bloomberg.

"Given how high fuel has been rising, this isn't surprising," Lisiak said. Manning & Napier, based in Fairport, New York, held about 4.19 million Carnival shares as of March.

Sales increased 8.9 percent to $2.9 billion in the three months through May. Analysts had estimated $2.91 billion.

Carnival was forced to cut prices for Caribbean cruises because of sluggish demand there. Middle-income customers more likely to take 3- to 5-night trips have curbed vacation spending because of higher gasoline prices and interest rates, said Chief Operating Officer Howard Frank. Carnival said Caribbean prices are little changed for the second half of 2007.

"The Caribbean was weak as expected, but conditions there are stabilizing," Robert LaFleur, an analyst at Susquehanna Financial Group, wrote yesterday in a research note. LaFleur, based in Stamford, Connecticut, rates the shares "positive."

Carnival said third-quarter profit will climb to $1.60 to $1.62 a share. Analysts surveyed by Bloomberg estimate $1.66. Fourth-quarter profit may be lower than in 2006 because of higher energy prices and costs to repair ships, said Frank.

Fuel prices rose seven percent to $333 per metric ton in the second quarter, compared with an original forecast of $310. Fuel will average $346 a metric ton this year, Carnival said. The company forecast average prices of $339 on March 28 and $318 a ton on March 16.

Carnival yesterday agreed to sell Cunard's Queen Elizabeth 2 to Dubai's Istithmar PJSC investment firm for $100 million. The ship, which began sailing in 1969, will be converted into a hotel and be anchored beside the emirate's Palm Jumeirah man- made island.

Carnival, which operates 82 ships, is adding new vessels to its European lines, including Costa Cruises, which serves passengers from Italy, France and Spain; and AIDA Cruises, geared toward German travellers.

The company plans to complete a joint venture to operate cruise ships in Spain and another to develop and operate cruise brands for Germans in the second half of the year.

By 2010, 62 percent of Carnival's ship capacity will be in North America, down from 69 percent in 2007, the company said.