Despite Hit From Hurricanes, Royal Caribbean Posts Record Q3 Earnings

Royal Caribbean International’s Liberty of the Seas and Jewel of the Seas

Royal Caribbean Cruises Ltd. (RCL) posted record third quarter results of $3.49 per share, which includes a $.20 negative impact from the recent hurricanes. 

Adjusted net income was $752.8 million while last year it was $690.9 million for the same reporting period. Net yields were up 5.3 percent, while net cruise costs were up 5.7 percent. Favorable trends in fuel, in both price and consumption, also provided a benefit to the quarter. 

“RCL calls out strong close-in booking and pricing trends in China, Europe and North America for Q3,” financial analyst Robin Farley from UBS Investment Research told investors in an email note. 

In addition, RCL also introduced a new three-year program designed to further drive performance. It’s called “20/20 Vision.” The company looks to improve what it terms “our already excellent guest satisfaction and employee engagement, while delivering our environmental commitments.” 

It also said that will help deliver double-digit adjusted earnings per share by fiscal 2020, while further improving on the company’s double-digit return on invested capital.

Full Year 2017 Forecast     

The line told analysts that for the full year it expects to earn $7.35 to $7.40 a share, which also includes a $.26 negative impact from the recent hurricanes. Net yields are expected to increase approximately 6 percent. 

In its earnings press release, RCL said: “The unprecedented series of hurricanes this summer devastated many people and places in Texas, Florida and the Caribbean and our sympathies go out to all those who suffered and are suffering losses. The repair and recovery efforts have been intense and most of the affected destinations served by our cruise ships have already been reopened or are about to be reopened. 

“Financially, the storms were unusually impactful because of when and where they hit and the net effect was a cost to the company in excess of $55 million or $0.26 per share. Most of this impact was from lost revenue, but there were also direct costs associated with the storms and with the company's humanitarian efforts. 

“In addition, there were significant timing shifts across a wide range of activities as expenses were shifted between quarters to adjust to the storms. Nevertheless, the company still expects to generate earnings for the year within the increased range of guidance provided prior to the storms.”

Richard Fain, the company’s chairman and CEO, said, “The recent storms presented extraordinary challenges and I am extremely proud of the generosity, strength of character and sense of social responsibility displayed by our employees and the industry as a whole."  

"Delivering record earnings during a period of such unprecedented disruption is a testament to the strength in demand for cruising and for our brands," said Jason Liberty, executive vice president and CFO. "Strong demand trends coupled with our continued cost discipline have put us in a strong position to successfully complete our Double-Double program. 

What that means is that RCL wants to double the company’s 2014 earnings per share by 2017 and increase return on invested capital to double digits. Liberty said in the earnings report: “I am pleased to report that we have already achieved our Double-Double targets on a trailing twelve month basis through September 2017."

2018 Outlook

The company also said it was experiencing strong early booking trends for 2018. Booked load factors and average per diems (APDs) are higher than same time last year while the booking window has continued to extend.  

While still early in the booking cycle, “the view for 2018 is encouraging and the company expects another year of solid yield and earnings growth,” RCL’s press release said. 

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