Markets
RCL

Royal Caribbean Increasing Liquidity After Pulling 2020 Guidance

When Royal Caribbean International (NYSE: RCL) reported its full-year 2019 results on Feb. 4, it guided for adjusted earnings per share of $10.40 to $10.70. However, it acknowledged that this guidance did not include any potential impact from COVID-19, as it couldn't reasonably predict the full extent of the fast-changing situation at the time.

Now Royal Caribbean is giving an update reflecting the impact of the coronavirus. Per its press release, all guidance for 2020 has been withdrawn. The company is also increasing its liquidity to make it through what will be a challenging year. In addition, it has increased its credit by $550 million and plans to cut costs to bring its total extra liquidity to $1.7 billion.

An aerial view of Royal Caribbean's ship Odyssey of the Seas.

Image source: Royal Caribbean.

Hard knocks for cruises

Almost everything on Wall Street is down over the last couple weeks, but cruise stocks are among the hardest hit in the consumer discretionary sector. Shares of Royal Caribbean are down 64% from 52-week highs as of this writing. Competitor Carnival Corporation is similarly down 62%.

The fear driving this sell-off makes sense on the surface, as the hit to cruise lines' revenue and earnings is real. The U.S. Department of State is requesting people not embark on cruises right now. And with the various cruise ships that have already been detained, many are taking advantage of the cancellation provisions cruise lines are offering. 

Between cancelled cruises and reduced passenger numbers, Royal Caribbean could have had a real cash flow problem in 2020. Shareholders committed to holding long-term should be encouraged that at least the company has provided a liquidity solution to keep the ship afloat in the coming year. 

10 stocks we like better than Royal Caribbean
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Royal Caribbean wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of December 1, 2019

 

Jon Quast owns shares of Carnival. The Motley Fool recommends Carnival. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

RCL CCL

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More