Royal Caribbean Cruises Ltd. Earnings Up for 2014, Good Year Expected in 2015


While Caribbean pricing remains soft, Wave Season looks good and Caribbean pricing will increase by low single digits for the rest of 2015, according to the latest earnings report from Royal Caribbean Cruises Ltd. // Photo by Susan J. Young

Royal Caribbean Cruises Ltd., parent company of Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises, reported adjusted net income for the full year 2014 at $755.7 million, or $3.39 per share, compared to $539.2 million or $2.44 per share for the prior year.

That’s a 40 percent year-over-year increase in adjusted earnings. Net yields for 2014 increased 2.4 percent, while onboard revenue yields were up 3.8 percent.

The company said the U.S. dollar strengthened toward year’s end and fuel prices declined worldwide, but at a more dramatic rate than the price of fuel flowing through to the cruise business. Adjusted net income for the fourth quarter of 2014 was $70 million, or $.32 per share, compared to $49.9 million or $.23 per share, in the fourth quarter of 2013.

"It's been a good year [in 2014] and we are looking forward to another good one in 2015," said Richard Fain, Royal Caribbean Cruises Ltd.’s chairman and CEO. "Our brands are performing at their strongest levels ever."

Typical Wave Season

The company also said passenger bookings over the past three months have been higher than prior year levels. Royal Caribbean's three brands are also experiencing what was described by the company as a good – but typical – Wave Season. That said, both load factors and average per diem rates are ahead of where they were last year at the same time.

In fact, the company's booked position at the end of 2014 was the best such position in the company's history, the company’s press release said. As of December 31, 2014, liquidity was $1 billion, including cash and the undrawn portion of the company's unsecured revolving credit agreements.

That said, Caribbean pricing remains highly competitive during the first quarter of 2015, but is expected to rise in the low single digits for the rest of the year. The company said it expects a net yield increase this year of 2.5 percent to 4.5 percent.

Cabana on Celebrity Cruises // Photo by Susan J. Young

"On the revenue front, although the first quarter remains a challenge, we are pleased with the way our summer season in the Caribbean, Europe, China and Alaska is coming together," said Jason Liberty, the company’s CFO. Adjusted earnings per share for 2015 is expected to be in the range of $4.65 to $4.85 per share, up from what the company previously gave as guidance to analysts ($4.55).

While the first quarter remains challenging, yields in the second, third and fourth quarters are expected to be higher, and will be up in the mid-single digits. On the expense side, Liberty said the company is continuing to drive efficiencies and cost savings while strategically investing in technology enhancements and growing markets, like China.

Ship moves this year? In the second quarter, Royal Caribbean International will take delivery of Anthem of the Seas, the sister ship to Quantum of the Seas that debuted last fall. TUI Cruises, the company's German joint venture, will take delivery of its second new build, Mein Schiff 4, this spring. Celebrity Cruises is also delivering the oldest ship in its fleet, Celebrity Century, to its Chinese joint venture, SkySea Cruises.

Based upon current ship orders, projected capital expenditures for full year 2015, 2016, 2017, 2018 and 2019 are $1.6 billion, $2.3 billion, $.4 billion, $2.2 billion and $.4 billion, respectively.

The cruise company also said its capacity increases for 2015, 2016, 2017, 2018 and 2019 are expected to be 5.5 percent, 6.6 percent, 3.8 percent, 4.4 percent and 3.7 percent, respectively. These figures do not include potential ship sales or additions that the company may elect to make in the future.