RCL sees record earnings

2018-10-28T21:46:39+00:00 October 28th, 2018|Finance|

Royal Caribbean Cruises (RCL) reported record earnings for the third quarter of this year and narrowed its full year adjusted EPS guidance.

For 3Q18, US GAAP net income was $810.4 mill or $3.86 per share and adjusted net income was $836.3 mill or $3.98 per share in 2018, versus US GAAP and adjusted net income of $752.8 mill or $3.49 per share in 3Q17.

Gross yields were up 1.9% in constant-currency (up 1% as-reported), while net yields were up 2.6% in constant-currency (up 1.8% as-reported).

Gross cruise costs per APCD increased 0.2% in constant-currency (down 0.2% as-reported). Net Cruise Costs (NCC), excluding fuel per APCD, were down 0.1% in constant-currency (down 0.4% as-reported).

For the full year, RCL predicted adjusted earnings will be in the range of $8.75 to $8.85 per share. This range includes a negative impact of about $0.10 per share from currency and fuel and also included Silversea’s operations.
Net Yields are expected to increase 4% to 4.5% in constant-currency and around 4.5% as-reported. These metrics include around 80 basis points from Silversea’s operations.

NCC, excluding fuel per APCD, were expected to be up by about 4.5% in constant-currency (up 4.5% to 5% as-reported). These metrics include about 140 basis points from Silversea’s operations.

“While 2018 is proving to be another record year, 2019 is shaping up to be even better,” said Richard Fain, RCL chairman and CEO. “I can’t recall ever starting a new year with such an exciting blueprint. Our brands are strong; our new ships are awesome; our existing ship upgrades are powerful; our tech is exciting; our people are psyched; and our other new products are opening new horizons.”

Since the last guidance, foreign exchange and fuel prices have continued to negatively impact the company’s results. Based on current rates, RCL said it expected these factors to cost the company about $0.10 per share in 2018 relative to the company’s previous guidance. Since the beginning of the year, currency and fuel have impacted expected earnings for both 2018 and 2019 by around $0.55 per share.

“2018 is shaping up to be another year of yield growth and record earnings,” said Jason Liberty, RCL’s executive vice president and CFO. “As we enter 2019, we are particularly enthusiastic about the new projects that complement our core business such as Perfect Day at Cococay, the new terminal in Miami and Excalibur. These investments will help us deliver even greater vacations while generating higher yields and better returns.”

For 4Q18, constant-currency net yields are expected to be up 6.5% to 7%. This metric includes about 350 basis points from Silversea’s operations.

NCC, excluding fuel, in constant-currency are expected to increase 6% to 6.5%, which includes around 500 basis points from Silversea’s operations. This updated guidance also reflected an increase in costs related to technology investments.

Based on current fuel pricing, interest and currency exchange rates and the factors detailed above, the company expects 4Q18 adjusted EPS to be in the range of $1.45 to $1.5 per share.

RCL said it was experiencing strong early booking trends for 2019.

Booked load factors and rates were higher than at same time last year across all core products, while the booking window has continued to extend. The market response to ‘Symphony of the Seas’, ‘Azamara Pursuit’ and ‘Celebrity Edge’ has been excellent. 

While these ships are being introduced this year, 2019 will see the benefit of their full year of operations in various markets, as they sail in both North America and Europe. 

These three vessels, together with ‘Spectrum of the Seas’, which will be introduced in June, 2019 in Shanghai, are supporting a solid outlook for 2019, the company said 
While it is still early in the booking cycle, the view for 2019 is encouraging and the company expects another year of solid yield and earnings growth. Regarding Silversea’s consolidation, while the bottom line impact in the near term is expected to be immaterial, RCL expected higher average yields for the company and higher costs per berth.
As of 30th September, 2018, liquidity was $1.5 bill, including cash and the undrawn portion of the company’s unsecured revolving credit facilities, net of the outstanding commercial paper borrowings. 

RCL noted that scheduled debt maturities (excluding commercial paper) for the remainder of 2018, 2019, 2020, 2021 and 2022 are $0.3 bill, $1.6 bill, $1.3 bill, $0.8 bill and $1.4 bill, respectively.
Based upon current ship orders, projected capital expenditures for full year 2018, 2019, 2020, 2021 and 2022 are $4.7 bill, $2.6 bill, $3 bill, $2.9 bill and $3.4 bill, respectively. 

Capacity changes for 2018, 2019, 2020, 2021 and 2022 are expected to be 4%, 8.6%, 4.2%, 8.6% and 8%, respectively.  These figures do not include potential ship sales or additions that may occur in the future, RCL said.