Royal Caribbean Cruises Ltd.
(
RCL
) reported third-quarter 2012 adjusted earnings of $1.68 per
share, which breezed past the Zacks Consensus Estimate of $1.45.
The results came on the back of efficient cost control measures.
However, earnings per share lagged the year-earlier level of
$1.82 per share.
Quarter Highlights
Total revenue in the quarter decreased 4.1% year over year to
$2,226.4 million which also beat the Zacks Consensus Estimate of
$2,214.0 million. Net yield nudged up 0.1% year over year on a
constant currency basis (down 2.4% on a reported basis). The
meager rise in yield was driven by a 0.6% improvement in on-board
revenue, partially offset by a 5.7% decline in net ticket
revenue. The occupancy rate nudged down to 107.3% from 107.9% in
the prior-year quarter.
Total cruise operating expenses also came down 4.1% year over
year to $1,348.3 million. Net cruise costs excluding fuel
increased 2.0% on constant-currency basis (decreased 0.2% on
reported basis).
Liquidity
At quarter end, the company had cash and cash equivalents
worth $241.2 million versus $262.2 million at the end of fourth
quarter 2011. At the end of the quarter, total long-term
debt was $6.6 billion versus $7.9 billion at the end of fourth
quarter 2011.
Guidance
For the fourth quarter, Royal Caribbean expects the bottom
line to range between a loss of 2 cents and a gain of 8 cents.
Net revenue yield is expected to increase 1% at constant
currency. Excluding fuel expenses, net cruise costs are estimated
to increase 1% at constant currency in the upcoming quarter. Fuel
costs are expected to be $229 million.
For full-year 2012, management raised its earnings per share
guidance to the range of $1.85-$1.95 from the range of
$1.70-$1.80. Anticipation of strong revenue generation, cost
reduction and currency benefits net of oil price increases led to
the hike in guidance.
Net revenue yield for 2012 is expected to increase 3% at
constant currency (previous range was 2-3%). Net cruise cost
excluding fuel is projected to increase 4% at constant currency
(same as earlier prediction). Fuel expenses are expected to be
$910 million per metric ton.
Although visibility is narrow, the company commented that the
booked load factors and average per diems for 2013 at the current
level are marginally higher year over year.
Our Take
We believe that Royal Caribbean is recovering at a steady pace
from its close competitor
Carnival Corp.
's (
CCL
) ship grounding in January and consequent dip in passengers'
confidence to sail. Further, the economic turmoil in Europe
continues to nag the company.
However, the upheaval seems to have dispersed as reflected by
the company's increased earnings guidance. The company also
experienced a slight increase in on-board revenue in the quarter
and its cost containment efforts are also paying off.
Given the company's relatively stabilized booking patterns,
cost containment efforts, fuel conservation initiatives and the
slowdown in industry capacity at the current level, we remain
optimistic on the stock of the world's second-largest cruise
operator.
Royal Caribbean currently carries a Zacks #2 Rank, which
translates into a short-term Buy rating. We maintain our
long-term Neutral recommendation on the stock.
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