Share price of
Royal Caribbean Cruises Ltd.
) increased 1.9% to $48.04 on Jan 27, 2014 after it posted strong
fourth quarter 2013 results, beating the Zacks Consensus Estimate
for both revenues and earnings.
Adjusted earnings of 23 cents per share beat the Zacks Consensus
Estimate of 18 cents by 27.7% and increased 130.0% year over
year. It was also above management's guidance range of 15 cents
to 20 cents per share. Earnings in the quarter received a boost
from the company's higher top line.
Total revenue in the quarter increased 2.7% year over year to
$1.854 billion and was ahead of the Zacks Consensus Estimate of
$1.849 billion by 0.27%. Increased onboard and other revenues and
solid close-in demand in Europe and Asia backed the top line.
On a constant currency basis, net yields increased 3.8% year over
year, better than the expected range of 2.0% to 3.0%. The strong
yields were driven by continued strength in European and Asian
sailings and solid onboard revenues, partially offset by slight
decline in Caribbean yield.
Passenger ticket revenues were up 1.18% year over year to $1.3
billion. Onboard and other revenues increased 6.2% year over year
to $564.0 million driven by the ship revitalization program,
packaging initiatives, as well as shore excursion enhancements.
During the reported quarter, onboard revenue yields were up 8.0%.
The company's occupancy rate increased 150 basis points year over
year to 103.3% in the fourth quarter. Net cruise costs (NCC),
excluding fuel, increased 1.8% on a constant currency basis,
which was lower than 3.9% increase in the prior quarter and
within the company's guidance range of 1.0% to 2.0%.
Total cruise operating expenses increased approximately 2.0% year
over year to $1.28 billion mainly due to a 2.9% rise in onboard
and other expenses, 4.0% increase in other operating costs, 2.7%
rise in food expenses, partially offset by 0.4% decline in
payroll and related costs.
Booking activity during the fourth quarter was consistent with
historical levels. On a year over year basis, booked load factors
are flat for the first quarter of 2014, but up for the second,
third and fourth quarter of 2014. While the Caribbean region is
facing pricing pressure, load factors and pricing are up
significantly in Europe and Asia.
Full-Year 2013 Highlights
Adjusted earnings per share for the full-year were $2.40 per
share, which beat the Zacks Consensus Estimate by 1.7% and were
up 21.8% year over year. Also, it was well above the management's
guidance range of $2.30 to $2.35 per share.
Total revenue grew 3.5% to approximately $7.959 billion, which
surpassed the Zacks Consensus Estimate of $7.919 billion by
Full-Year 2014 Guidance Raised
The company raised its earnings per share guidance to a range of
$3.20 to $3.40 from previous expectation of $3.06 per share.
Also, the new range is far ahead of the Zacks Consensus Estimate
On a constant-currency basis, the company expects net yields to
increase in the range of 2.0% to 3.0% in 2014. Despite,
inflationary pressure, rising insurance costs and continued
investments in product and marketing, net cruise costs excluding
fuel are expected to be flat to slightly down in 2014.
First Quarter 2014 Guidance
The company expects earnings per share in the range of 20 cents
to 30 cents per share in first quarter 2014, which fell short of
the Zacks Consensus Estimate of 44 cents. The first quarter of
2014 is expected to be difficult compared to the prior-year
quarter, which saw the highest yields in more than a decade. The
negative publicity and its effects on Caribbean sailings were
felt only after the first quarter of 2013.
The company expects net yields on a constant currency basis to be
flat during the first quarter of 2014. However, for the second,
third and fourth quarters, the company expects higher yields due
to easier comparisons and strong performance in Europe and Asia
Of late, Royal Caribbean has been facing negative publicity
following a string of mishaps. However, a 130.0% year over year
increase in quarterly earnings driven by higher prices in Europe
and Asia demonstrates resurgence in demand. Given the company's
relatively stable booking patterns and fuel conservation
initiatives, we remain optimistic on this cruise operator.
Royal Caribbean holds a Zacks Rank #1 (Strong Buy). Some other
stocks worth considering in the leisure and recreational services
Carmike Cinemas Inc.
ClubCorp Holdings, Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
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