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Royal Caribbean (RCL) Beats on Q2 Earnings, Lifts '17 View

Royal Caribbean Cruises Ltd. RCL posted solid second-quarter 2017 results with both earnings and revenues topping the Zacks Consensus Estimate. Strong close-in demand for cruise bolstered the quarterly performance.

In fact, solid demand trends and continued cost discipline, resulted in the highest second-quarter earnings in the company’s history. Royal Caribbean thus remains positioned to witness another record year and achieve its targets under the Double-Double program.

Adjusted earnings of $1.71 per share were 2.4% ahead of the Zacks Consensus Estimate of $1.67 as well as above the management’s guided range of $1.60 to $1.65. Further, earnings jumped a significant 56.9% from the year-ago tally of $1.09, owing to higher revenues and lower expenses.

Total revenue increased 4.3% year over year to $2.195 billion, driven by higher passenger ticket revenues as well as better onboard spending. However, revenues slightly missed the Zacks Consensus Estimate of $2.191 billion.

Royal Caribbean Cruises Ltd. Price, Consensus and EPS Surprise

 

Royal Caribbean Cruises Ltd. Price, Consensus and EPS Surprise | Royal Caribbean Cruises Ltd. Quote

Quarter Highlights

On a constant currency basis, net yields increased 11.5% year over year, better than the guided range of 10-10.5%. The outperformance came on the back of strong close-in demand, which in turn, drove higher pricing and occupancy.

Both passenger ticket revenues as well as onboard and other revenues increased 4.3% to $1.58 billion and $613.9 million, respectively.

Net cruise costs (NCC), excluding fuel, decreased 0.9% on a constant currency basis, lower than management’s guidance of a decline of about 2%.

Also, total cruise operating expenses decreased 4.1% year over year to nearly $1.26 billion, mainly due to a decline in onboard and other expenses, lower food, fuel, payroll and related as well as other operating costs. The decrease was partly offset by higher commissions, transportation and other costs.

3Q17 Guidance

For the third quarter, Royal Caribbean expects adjusted earnings per share to come in at $3.45. The Zacks Consensus Estimate of $3.29 per share is pegged below the guidance.

Constant-currency net yields are projected to increase in the range of 4-4.5%. Notably, solid demand trends for Europe and North America products are driving improvement over an already strong previous year.  

NCC, excluding fuel, are likely to be up about 4% at constant currency.

2017 Guidance Updated

For full-year 2017, the company now anticipates earnings in the band of $7.35 to $7.45 per share, up from the earlier guided range of $7–$7.20. Better-than-expected performance in the quarter along with favorable booking trends led to the improvement. The Zacks Consensus Estimate for 2017 is pegged at $7.24.

The company expects net yields to increase in the range of 5.5% to 6%, on a constant currency basis, up slightly from the prior guidance of an increase in the range of 4.5-6%, given better results in the second quarter as well as stronger trends for the rest of the year.

NCC, excluding fuel, on a constant currency basis, are expected to be up roughly 1%. Previously, the company expected the same to be flat to up slightly.

The company stated that bookings continue to be very robust. In fact, its booked position for the rest of 2017 continues to set new records. Moreover, Royal Caribbean booked position for the next 12 months is also strong, and ahead of the same time last year, in both rate and volume.

Other Cruise Operators

Cruise and vacation company Carnival Corporation CCL reported better-than-expected second-quarter fiscal 2017 results in June, with both earnings and revenues beating the Zacks Consensus Estimate.

Another cruise-line operator, Norwegian Cruise Line Holdings Ltd. NCLH, is expected to report its second-quarter 2017 numbers on Aug 8. The Zacks Consensus Estimate for the quarter’s bottom line is pegged at 97 cents.

Zacks Rank & Stock to Consider

Royal Caribbean currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the same sector is Live Nation Entertainment, Inc. LYV sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Live Nation’s trailing four-quarter average positive surprise is 30.28%. The Zacks Consensus Estimate for 2017 earnings moved up 12.5% over the last 60 days.

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Carnival Corporation (CCL): Free Stock Analysis Report
 
Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report
 
Norwegian Cruise Line Holdings Ltd. (NCLH): Free Stock Analysis Report
 
Live Nation Entertainment, Inc. (LYV): Free Stock Analysis Report
 
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