Royal Caribbean: Double-Digit Earnings Goal

Royal Caribbean Cruises expects annual earnings in the range of $7.35 to $7.40, adjusted only slightly from the annual guidance given in Q2 at $7.35 to $7.45, despite absorbing a negative impact of $0.26 from the recent hurricanes.

On the Nov. 7 Q3 earnings call, Jason Liberty, senior vice president and CFO, said the brands’ strong booked position, onboard revenue, better fuel prices and better than expected results from joint ventures (TUI and Pullmantur) are driving the expected year-end results.

For 2018, Royal Caribbean executives said that load factors and pricing are higher than they were for 2017 at this time last year and that they expect 2018 to be the company’s ninth consecutive year of yield improvement. Between now and 2020, the goal is to achieved double digit earnings, meaning $10 per share or more.

Next year, the Royal Caribbean, Celebrity and Azamara brands will be introducing new ships, increasing the total capacity by 4 percent. The Caribbean will account for about half of the fleets’ overall deployment, Europe will have 17 percent, up slightly from this year, and the Asia/Pacific region will have 18 percent, slightly less than this year. There will be some capacity reduction in China.

Michael Bayley, president of the Royal Caribbean brand, said he was encouraged by the capacity reduction in China for 2018 plus the rumors regarding South Korea opening up again for Chinese passengers. Combining these two factors, he said, he felt quite good about China for 2018.

For Q3, Royal Caribbean posted increased revenues despite carrying fewer passengers and posting fewer passenger cruise days due to the hurricanes. The increase in bottom line net income, however, was driven mostly by reduced operating expenses, increased equity investment and lower interest expenses.

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