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Royal Caribbean (RCL) Q3 Earnings Beat, Hurricanes Hit Sales

Zacks
Royal Caribbean Cruises Ltd. RCL posted mixed third-quarter 2017 results wherein earnings topped the Zacks Consensus Estimate while revenues lagged the same. Though strong close-in booking and pricing trends bolstered the quarterly performance, hurricanes had a negative impact on the quarter’s earnings to the tune of 26 cents per share.
Meanwhile, solid demand trends and continued cost discipline led the company to successfully complete its Double-Double program. Further, Royal Caribbean its new three-year program designed to drive performance: 20/20 Vision.
Adjusted earnings of $3.49 per share outpaced the Zacks Consensus Estimate of $3.43 by 1.8%. The reported figure was also above management’s projected figure of $3.45 per share. Further, earnings increased 9.1% from the year-ago tally of $3.20 on the back of slightly higher revenues and lower fuel costs.
Total revenues increased 0.2% year over year to $2.57 billion, driven by higher onboard and other revenues. However, the same slightly missed the Zacks Consensus Estimate of $2.58 billion. Per management, the hurricanes had a negative impact on quarterly revenues.
Quarter Highlights
On a constant currency basis, net yields increased 5.3% year over year better than the guided range of 4-4.5%. The outperformance came on the back of strong booking and pricing trends on China, Europe and North American itineraries.
While passenger ticket revenues decreased 0.4% to $1.89 billion, onboard and other revenues increased 1.9% to $676.4 million.
Net cruise costs (NCC), excluding fuel, increased 5.7% on a constant currency basis, more than management’s expectation of a 4% increase. Notably, the rise in the costs was mainly owing to reduced capacity due to hurricanes.
Excluding the impact of the same, absolute costs for the quarter were lower than expected because of timing.
Total cruise operating expenses decreased 1.6% year over year to nearly $1.32 billion, mainly due to a decline in onboard and other expenses, lower fuel, payroll and related as well as other operating costs. This was partly offset by increased food expenses as well as higher commissions, transportation and other costs.
4Q17 Guidance
For the fourth quarter, Royal Caribbean expects adjusted earnings per share to come in the range of $1.15 to $1.20. The Zacks Consensus Estimate is pegged higher than the guidance at $1.25 per share.
Constant-currency net yields are projected to increase in the range of 2-2.5%.
NCC, excluding fuel, is likely to be up about 8.5% at constant currency.
2017 Guidance
For 2017, the company now anticipates earnings in the band of $7.35 to $7.40 per share, compared with $7.35-$7.45, projected earlier. The Zacks Consensus Estimate for 2017 is pegged at $7.40.
The company expects net yields to improve 6% on a constant currency basis compared with the prior guidance of 5.5-6% increase.
NCC, excluding fuel, on a constant currency basis, is expected to be up roughly 2%. Previously, the company expected the same to be up 1%.
Meanwhile, management noted that they are experiencing strong early booking trends for 2018.
Other Cruise Operators
Cruise and vacation company, Carnival Corp. CCL reported better-than-expected second-quarter fiscal 2017 results in June wherein both earnings and revenues surpassed the Zacks Consensus Estimate.
Another cruise-line operator, Norwegian Cruise Line Holdings Ltd. NCLH is expected to report its third-quarter 2017 numbers on Nov 9, before market opens. The Zacks Consensus Estimate for the quarter’s bottom line is pegged at $1.82 per share.
Zacks Rank & Stock to Consider
Royal Caribbean carries a Zacks Rank #3 (Hold). A better-ranked stock in the same space is International Speedway Corp. ISCA holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
International Speedway’s current-quarter and current-year earnings estimates have moved up 1.4% and 1.9%, respectively, over the last 60 days.
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