NEW YORK (Reuters) - Carnival Corp & Plc projected third-quarter results that fell short of Wall Street estimates yesterday, citing higher fuel costs and volatile foreign exchange rates.

Carnival predicted third-quarter earnings between $1.43 and $1.47 per share. On average, analysts predicted earnings of $1.52 per share, according to Thomson Reuters.

"The $0.05-$0.07 below consensus guidance for (the third quarter) will likely produce near-term caution," Wells Fargo analyst Tim Conder said in a research note.

"We feel this is CCL management taking a conservative view, given the recent FX volatility," added Conder, who has an "overweight" rating on the stock.

Shares of the world's largest cruise operator fell as much as four percent on the New York Stock Exchange, and were down 2.5 percent at $33.87 in afternoon trading.

During a conference call, analysts peppered executives with questions about how demand for cruise vacations has fared in Europe and North America in light of concerns over the fiscal health of European countries, including Greece, and a drop in the overall US stock market.

Carnival, as well as its rival Royal Caribbean Cruises Ltd , is adding more capacity in Europe, an area that is seen as a burgeoning market for cruise demand.

Executives said these market volatility coupled with flight disruptions caused by the volcano eruption in Iceland prompted some consumers— particularly those in North America— to rethink their discretionary spending decisions.

"Our North American brands tend to be more sensitive and longer cruises... and luxury-type cruises tend to be more affected by market volatility and gyrations," chief executive Micky Arison told analysts. "In the month of May, we felt some of that."

Even so, bookings and prices are trending higher for the rest of 2010 compared with last year, the company said.

Carnival executives told analysts that net revenue yields rose two percent, the first time the company has seen a jump in this metric since late 2008.

Yields measures the amount of revenue derived from each unit of capacity.

In the second quarter, Carnival reported net income of $252 million, or 32 cents per share, compared with $264 million, or 33 cents per share, a year ago.

This bested Wall Street expectations of 29 cents per share. Revenue rose to $3.2 billion for the quarter from $2.9 billion a year before.

"The strength of our revenue and cost performance in the second quarter of 2010 were once again masked by rising fuel prices," chief financial officer David Bernstein said during the call.

Rising oil prices cost the company 20 cents per share in the second quarter. Carnival does not hedge its fuel exposure.

At current prices, fuel costs to the company will likely increase $440 million in 2010 compared with 2009, costing the company 55 cents per share.

The company said it still expects yields to increase between two percent and three percent in 2010, when stripping out the effect of fluctuations in currency exchange, such as the slide in the euro.

Still, the company said yields should be flat for 2010, compared with 2009, when adjusted for foreign exchange.