RCCL Earnings Reveal Caribbean Softness, Strength in Europe & China

quantum of the seasRoyal Caribbean Cruises Ltd. (RCCL), parent of Azamara Club Cruises, Celebrity Cruises and Royal Caribbean International, reported second quarter financial results and introduced a three-year profitability initiative called the Double-Double Program.

Highlights of the second quarter 2014? Net yields were up 2.4 percent, net cruise costs down 4.2 percent. Adjusted quarterly net income was $146.7 million or $.66 per share, versus $34.2 million for the same quarter in 2013.

The world’s second largest cruise company said that for the full year 2014, it expects net yields to increase 2 to 3 percent. Adjusted earnings per share are anticipated to be in the range of $3.40 to $3.50 per share, the company said in its earnings press release.

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A newly announced Double-Double Program will help increase the company’s return on invested capital to double digits and the goal is to double 2014 earnings per share. The company said articulating clear and specific goals helps guide internal decision-making and better informs investors.

“Our focus over the last few years on improving investment returns with moderate capacity growth is clearly paying dividends," said Richard D. Fain, the cruise company's chairman and CEO. "Our brands have never been stronger and we are well positioned for continued step change in performance.” He called the new program “demanding” but said targets were realistic.

Among other highlights mentioned in the second quarter earnings report?

Bookings Look Good: Bookings since the April earnings call have been up nicely and the company continues to be booked ahead of last year in both load factor and average per diem pricing.

Good Yield Improvement: Double-digit yield improvement on European and China sailings is helping offset a continued promotional environment in the Caribbean.

Rising Onboard Revenue: Onboard revenue showed a 3 percent increase for the quarter, the 10th consecutive quarter of onboard revenue growth

Good Liquidity: As of June 30, 2014, liquidity was $1.1 billion, including cash and the undrawn portion of the company's unsecured revolving credit facilities.

Projected Capital Expenditures: Based upon current ship orders, projected capital expenditures for full year 2014, 2015, 2016, 2017 and 2018 are $1.4 billion, $1.4 billion, $2.2 billion, $0.3 billion and $1.5 billion, respectively.

Capacity Increases: Capacity increases for 2014, 2015, 2016, 2017 and 2018 are expected to be 1.7 percent, 6.9 percent, 7 percent, 3.7 percent and 3.9 percent, respectively. These figures do not include potential ship sales or additions the company may elect to make in the future.

In the fourth quarter of 2014, the Royal Caribbean International brand takes delivery of the first of three Quantum-class vessels, the first first new ship delivery for the brand since 2010.

Robin Farley, a UBS Investment Research analyst who covers the cruise industry, told her firm's investors in an e-mail yesterday, that the company's long-term target for earnings may suggest a good 2015 outlook so far.

Agents might read the full press release at www.rclinvestor.com/phoenix.zhtml?c=103045&p=irol-newsArticle&ID=1950924&highlight.