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Mixed 4Q for Royal Caribbean - Analyst Blog
2/5/2013 9:00:00 AM
Royal Caribbean Cruises Ltd.
) fourth-quarter 2012 adjusted earnings of 10 cents per share
surpassed the Zacks Consensus Estimate of 6 cents. However,
earnings per share lagged the year-earlier level of 17 cents per
share. Earnings in the quarter suffered due to higher marketing,
selling and administrative as well as fuel expenses.
Total revenue in the quarter inched up 1.7% year over year to $1.81 billion, in line with the Zacks Consensus Estimate. Total revenue increased as a result of a 0.5% increase in ticket revenues and 4.7% in rise in onboard revenues.
Net yield nudged up 1.8% year over year on a constant currency basis backed by better-than-expected close-in bookings and onboard spending. However, the occupancy rate fell to 101.8% from 103.0% in the prior-year quarter.
In the reported quarter, Royal Caribbean witnessed lower demand from Europe burdened with austerity measures while demand from the U.S. remains strong.
Total cruise operating expenses recorded a slight increase of 0.5% year over year to $1,258.0 million. Net cruise costs excluding fuel increased 1.0% on a constant-currency basis (0.4% on reported basis).
Adjusted earnings per share for the full-year were $1.97 per share, which beat the Zacks Consensus Estimate by 1.0% but were 28.9% lower than the year-ago level. On a reported basis, earnings were 8 cents per share versus $2.77 per share recorded in the year-earlier quarter.
Total revenues grew 2.0% to $7.69 billion, which surpassed the Zacks Consensus Estimate of $7.67 billion due to expansion in revenues as well as efficient cost control measures. Total revenue increased attributable to a 1.24% increase in ticket revenues and 4.1% rise in onboard revenues.
For the first quarter, Royal Caribbean expects its earnings to range between 10-20 cents. Net revenue yield is expected to increase 2%-3% at constant currency. Excluding fuel expenses, net cruise costs are estimated to increase 2% at constant currency in the upcoming quarter. Fuel costs are expected to be $245 million per metric ton.
For full-year 2013, management expects its earnings per share guidance in the range of $2.30-$2.50 per share. Net revenue yield for 2013 is expected to increase 2%-4% at constant currency. Net cruise cost excluding fuel is projected to increase 2%-3% at constant currency. Fuel expenses are expected to be $960 million per metric ton.
The company is 55% hedged for fuel for the remainder of 2013 and 45%, 25% and 7% hedged for 2014, 2015 and 2016, respectively.
Since parts of Europe remain weak, management is striving hard to reduce its deployment in Europe and place it in better positioned regions.
Royal Caribbean currently carries a Zacks Rank #3 (Hold). We believe that Royal Caribbean is recovering at a steady pace from its close competitor Carnival Corp. 's ( CCL ) ship grounding incident in Jan 2012 and a consequent dip in passenger confidence.
With a healthy booking trend witnessed in the U.S. on the eve of the Wave Season, management hopes bookings in the U.S. as well as Caribbean and Alaska will offset ongoing weaknesses in debt-ridden Europe.
Further, the slowdown in industry capacity, the company's cost containment efforts and fuel conservation initiatives augur well for the world's second-largest cruise operator.
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