By Joan E. Solsman
Royal Caribbean Cruises Ltd. (RCL) ship upgrades and mending
demand in Europe helped it to a better-than-expected "wave season"
quarter, reporting 62% higher first-quarter earnings.
However, the cruise operator's thawing worries failed to warm
its downbeat financial outlook for the year, which it held steady
while predicting earnings in the current quarter would be below
expectations.
After an onslaught of negative publicity for the cruise
industry, the market focused on the fact Royal Caribbean's business
was barely jarred. Shares were up 4.9% at $35.94 premarket. Through
the prior day's close, they were up a fraction year to date, which
is weak compared to the wider market but outperforms bigger rival
Carnival Corp. (CCL), which as been plagued by multiple mechanical
snafus.
Thursday, Chairman and Chief Executive Richard Fain said ticket
revenues were better than expected and onboard spending increased
noticeably, which he credited to Royal Caribbean's ongoing project
updating older ships with popular features of newer ones. Though
costs were lower than the company anticipated, the main factor was
timing.
While bookings in North American remained strong, Royal
Caribbean wasn't immune to the high-profile missteps by its bigger
rival Carnival. It noted "a modest disruption to Caribbean demand,
which the company attributes to adverse industry media
coverage."
But demand from European-sourced guests--long an area of
weakness--strengthened in early February and the company expects
pricing improvement from the region for the year.
Net yields--a key industry metric measuring revenue per
available cruise day--rose 3.6% excluding currency effects, better
than the 2% to 3% growth predicted in February.
The quarter coincides with "wave season," the cruise industry
term for the start of each calendar year when most customers plan
and book their voyages. Both Royal Caribbean and Carnival were wary
early in the season, noting weakness in areas like Southern Europe
because of austerity measures, economic pressure and the lingering
skittishness about cruising after a deadly ship crash off the
Italian coast last year.
Since that early peek into how the bookings were faring,
Carnival's outlook has grown more wan, plagued with multiple
mechanical flubs including the high-profile stranding of its
powerless Triumph ship in the Gulf of Mexico. Analysts have noted
the bad publicity has forced Carnival to reduce prices, but the
fallout has appeared to be limited to Carnival's own line and not
that of competitors.
Royal Caribbean, which operates its namesake line as well as
Celebrity and Pullmantur cruises, posted a profit of $76.2 million,
or 35 cents a share, from $47 million, or 21 cents a share, a year
earlier. In February, Royal Caribbean forecasted 10 cents to 20
cents a share, below analysts' estimates at the time.
Revenue increased 4.2% to $1.91 billion. The analyst consensus
was $1.9 billion.
In the second quarter, Royal Caribbean predicted 10 to 15 cents
a share in profit, while analysts surveyed by Thomson Reuters were
expecting 17 cents.
Write to Joan E. Solsman at joan.solsman@dowjones.com
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