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Royal Caribbean's (RCL) Shares Jump 5% on Q4 Earnings Beat

Shrabana Mukherjee

Royal Caribbean Cruises Ltd.’s RCL shares climbed more than 5% following fourth-quarter 2019 results, wherein earnings beat the Zacks Consensus Estimate, after missing the same in the third quarter.

Adjusted earnings of $1.42 per share topped the Zacks Consensus Estimate of $1.41 by 0.7%. However, the figure declined 7.2% year over year, owing to negative impact of the cancellation of sailings to Cuba and disruption generated by Hurricane Dorian.

Total revenues were $2,517.4 million, missing the consensus mark of $2,532 million by 0.9% but improving 7.9% from the year-ago quarter. This year-over-year upside can be attributed to higher passenger ticket, and onboard and other revenues.

Royal Caribbean Cruises Ltd. Price, Consensus and EPS Surprise


Royal Caribbean Cruises Ltd. Price, Consensus and EPS Surprise

Royal Caribbean Cruises Ltd. price-consensus-eps-surprise-chart | Royal Caribbean Cruises Ltd. Quote


Quarterly Highlights

Passenger ticket revenues improved 8% to $1,784.5 million, and onboard and other revenues increased 7.7% from the prior-year quarter to $733 million.

On a constant-currency basis, net yields rose 6.8% year over year, which was within the company’s guidance.

Net cruise costs (NCC), excluding fuel per APCD, increased 15.9% on a constant-currency basis. Higher marine costs and employee-related expenses led to the increase.

Total cruise operating expenses of $1,481.5 million increased 18.9% on a year-over-year basis. The company’s operating expenses increased at the Payroll and related, Onboard and other, Commissions, transportation and other, and Food segments. However, fuel expenses declined during the quarter under review.

2019 Highlights

Adjusted earnings came in at $9.54 per share, reflecting an increase of 7.7% from the 2018 level. Revenues advanced 15.3% from a year ago to $11 billion. This upside was achieved despite a series of disruptions that include the dry-dock incident in the Grand Bahama shipyard, cancellation of cruises to Cuba and an unusual hurricane season, all of which negatively impacted the company's results for the year.

Net Yields were up 8% on a constant-currency basis.

20> 25 by 2025 Program

The company introduced the 20> 25 by 2025 program. With the help of this program, it expects to achieve $20.00 adjusted earnings per share; reduce carbon footprint by 25%; deliver strong returns on invested capital; and continue to improve on record guest satisfaction and employee engagement metrics.

Q1 Guidance

For first-quarter 2020, Royal Caribbean expects adjusted earnings per share within 80-85 cents. The Zacks Consensus Estimate for first-quarter earnings is currently pegged at $1.11 per share.

Constant-currency net yields are projected to decrease 0.5% from the year-ago quarter. NCC, excluding fuel, is likely to improve 3% on a constant-currency basis.

Although demand for core products and onboard experiences remains strong, the company stated that the unprecedented bushfires in Australia, and recent activities in Hong Kong and the Middle East will have a negative impact on the first quarter. Moreover, the first quarter is negatively impacted by other structural elements such as the discontinuation of Cuba sailings that equals a revenue headwind of approximately 120 basis points and a tough year-over-year comparable.

2020 Guidance

Royal Caribbean projects adjusted earnings within $10.40-$10.70 per share. The company has cancelled eight cruises out of China ending Mar 4 and also modified certain itineraries in the region, which are estimated to have an overall impact of 25 cents per share.

The Zacks Consensus Estimate for 2020 earnings is pegged at $10.50 per share. The company expects net yields to increase 2.25-4.25% on a constant-currency basis.

NCC, excluding fuel, is expected to be up 1.75-2.25% on a constant-currency basis.

Zacks Rank & Stocks to Consider

Royal Caribbean, which shares space with Carnival Corporation & Plc CCL, currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Leisure space include Ctrip.com International, Ltd. TCOM and WW International, Inc. WW, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ctrip.com and WW International’s 2020 earnings are expected to witness robust growth of 21% and 16.7%, respectively.

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