Royal Caribbean Cruises Ltd.
(
RCL
) has reported second-quarter 2012 adjusted earnings of 3 cents per
share, which fell short of the Zacks Consensus Estimate of 4 cents.
On a GAAP basis, the company reported a loss of 2 cents per share
in contrast to earnings of 43 cents in the year-earlier
quarter.
Quarter Highlights
Total revenue in the quarter increased 3.0% year over year to
$1,821.0 million which lagged the Zacks Consensus Estimate of
$1,838.0 million.
Net yield upped 4.5% year over year on a constant currency basis
(1.8% on a reported basis). The rise in yield was driven by a 3.0%
improvement in net ticket revenue and a 3.8% increase in on-board
revenue. The occupancy rate inched up to 104.1% from 103.7% in the
prior-year quarter.
Total cruise operating expenses rose 9.3% year over year to
$1,296.0 million. NCC excluding fuel increased 8.3% on
constant-currency basis (5.8% on reported basis).
Financials
At quarter end, the company had total assets worth $19.7 billion
versus $19.8 billion at the end of fourth quarter 2011. At
the end of the quarter, total long-term debt was $7.1 billion
versus $7.9 billion in the year-ago quarter.
Guidance
For the third quarter, Royal Caribbean expects the bottom line to
range between $1.40 and $1.50. Net revenue yield is expected to
decrease 1-2% at constant currency. Excluding fuel expenses, net
cruise costs are estimated to increase 3% at constant currency in
the upcoming quarter. Fuel costs are expected to be $213
million.
For full-year 2012, management slashed its earnings per share
guidance to the range of $1.70-$1.80 from the range of
$1.80-$2.10. Net revenue yield is expected to increase 2% to
3% at constant currency (previous range was 2-5%). Net cruise cost
excluding fuel is projected to increase 4% at constant currency
(earlier 5%). Fuel expenses are expected to be $899 million per
metric ton.
Our Take
We are a bit doubtful about the sector's performance over the
near term as the joint effect of Royal Caribbean's close competitor
Carnival Corp.
's (
CCL
) ship grounding in January and economic turmoil in Europe continue
to nag. While management commented that passengers, especially who
are not first-time cruisers, have almost recovered from the
grounding tragedy in Italy in January this year, the slump in
bookings in the peak booking season along with a faltering market
sentiment will actually mar Royal's performance this year.
The upheaval is reflected by the company's reduced earnings as well
as yield guidance.
However, as these threats are short term in nature, we remain
positive on the stock of the world's second-largest cruise operator
over the long term based on a host of factors including relatively
stabilized booking patterns, cost containment efforts, fuel
conservation initiatives and the slowdown in industry capacity at
the current level.
Royal Caribbean currently retains the Zacks #3 Rank, which
translates into a short-term Hold rating.
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