Royal Caribbean Cruises Ltd. Posts Better Than Expected Quarterly Earnings

Royal Caribbean International Mariner of the Seas Hong Kong Photo by Royal Caribbean Young Editorial Use Only
Royal Caribbean International's Mariner of the Seas is shown docked in Hong Kong

Posting better than expected financial performance in the second quarter 2017, Royal Caribbean Cruises Ltd. (RCL), the parent of Azamara Club Cruises, Celebrity Cruises and Royal Caribbean International, reported that its quarterly earnings per share of $1.71 showed growth of nearly 60 percent over the same time last year.

Second quarter net income was $369.5 million, versus $229.9 million for the same quarter a year ago. Net yields were up 11.5 percent, while net cruise costs excluding fuel were down less than 1 percent.

"Our brands are executing beautifully, keeping the business in an exceptionally strong position," said Richard Fain, RCL's chairman and CEO.  "Strong close-in demand for cruise bolstered the quarter, and we see further uplift for the balance of the year." 

Bookings Look Strong

The company said its booked position for the rest of 2017 continues to set new records.

For the next 12 months, bookings also look strong -- both in rate and volume, versus the same time last year.

Based on the results, RCL said its net yields for the year are expected to increase 5.5 percent to 6 percent, up because of the better second quarter results and stronger trends for the balance of the year.

"Demand has remained strong, and we have captured the related revenue opportunity," said Jason Liberty, RCL's executive vice president and CFO. "These demand trends and continued cost discipline have resulted in the highest second quarter earnings in company history and have put us in position for another record year..." 

The company is working to achieve what it terms "double-double" targets in a multi-year program designed to better communicate and motivate employees about RCL's business goals by articulating longer-term financial objectives.

Under the program, the company is targeting a goal of adjusted earnings per share of $6.78 in 2017 (double that of $3.39 in 2014) and ROIC of 10 percent in 2017, compared with 5.9 percent in 2014.  

Taking into account account current fuel pricing, interest rates, currency exchange rates, results from this quarter and other factors, the company expects 2017 earnings per share to exceed those goals -- with results ranging from $7.35 to $7.45 per share.

Looking ahead to the third quarter 2017, RCL said its net yields should be up from 4 percent to 4.5 percent. "Strong demand trends for Europe and North America products are driving improvement over an already strong previous year," the company said in its financial press release.

As of June 30, 2017, the company's liquidity was $1.9 billion, which includes cash and availability of funds from the company's unsecured revolving credit facilities.

Based upon current ship orders, projected capital expenditures for the full years 2017, 2018, 2019, 2020 and 2021 are $0.6 billion, $2.8 billion, $1.6 billion, $2.1 billion and $2.4 billion, respectively.  

Capacity is expected to increase 1.9 percent in 2017, 3.3 percent in 2018, 6.6 percent in 2019, 3.9 percent in 2020 and 7.9 percent in 2021. Those figures are exclusive of any potential ship sales or additions that the company elects to make in the future.

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