Royal Caribbean Cruises Ltd. Posts Better Than Expected Net Income

Royal Caribbean Cruises Ltd. (RCL), parent company of Azamara Club Cruises, Celebrity Cruises and Royal Caribbean International, reported stronger than expected first quarter 2015 results today. It also updated its outlook for the full year.

Adjusted first quarter 2015 net income was $45.2 million, or $.20 per share, versus a forecast of $.10 to $.15 per share. That compares to adjusted net income of $46.1 million, or $.21 per share, in the first quarter of 2014. 

Net yields were down 5.4 percent, but strong close-in demand and pricing on Caribbean sailings drove the better than anticipated performance. That more than offset weaker onboard sales from internationally sourced guests, whose purchasing power has been diminished with the strengthening of the U.S. dollar. The majority of RCCL’s onboard revenue sales are priced in U.S. dollars. 

The company said in a press release that “commercially the year is turning out as expected, with strong booking trends and yield growth for all major products.” It also noted that while the stronger U.S. dollar and higher fuel prices have had some negative impact, cost efficiencies are helping to even things out. 

"It is gratifying to post another strong quarter with both revenues and expenses exceeding expectations," said Richard Fain, RCL’s chairman and CEO. "Despite ongoing volatility in the currency and fuel markets, our Double-Double program remains solidly on track." That program is designed to double earnings.

For example, the company has taken actions to extend the booking curve, and that’s helped booked load factors and average per diems. RCCL also has taken steps to improve the integrity of its pricing model including steps to eliminate last minute discounting.

Interesting tidbits from the earnings report?

- Overall booking volumes during the first quarter were higher than prior year levels despite adjustments for increased capacity.

Caribbean itineraries enjoyed particularly strong demand.

Bookings were also up year-over-year for Europe and China itineraries.

European itineraries are booked at a higher load factor and APD than last year.

Western Mediterranean itineraries have been booking well, while trends have been a little weaker for eastern Mediterranean itineraries, particularly those cruises that turn around in Turkey.

Demand for China remains strong. Bookings there have outpaced expectations despite the region’s significant capacity growth.

"The business continues to perform well, despite the currency volatility," said Jason Liberty, chief financial officer. "Our unwavering commitment to cost consciousness has helped us identify further efficiencies that are driving a significant shift in our cost guidance for the full year. This type of operational focus throughout all facets of our business is a core enabler of our continued financial success."

Adjusted earnings per share for the full year are expected to be $4.45 to $4.65 per share – $.20 lower than the company had previously estimated. That said, look for net yields to rise 2.5 percent to 4 percent.

Taking into account current fuel pricing, interest rates, currency exchange rates and other factors, RCL says adjusted earnings per share are expected to be $4.45 to $4.65 per share.

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