Royal Caribbean Cruises today reported 2019 US GAAP earnings of $8.95 per share and adjusted earnings of $9.54 per share and announced that 2020 adjusted earnings are expected to be in the range of $10.40 to $10.70 per share.
“Given the fluidity of the circumstances related to the Wuhan Coronavirus and the actions being taken to contain its spread, the 2020 adjusted guidance provided herein does not include any financial impact related to this subject,” the company said in a press release.
So far, the company has cancelled eight cruises out of China through early March, and has also modified certain itineraries in the region which overall have an estimated impact of $0.25 per share.
“There are still too many variables and uncertainties regarding this outbreak to calculate the impact on the business,” Royal Caribbean said. “For example, we expect that an erosion of consumer confidence in China could have an additional impact on load factor and rate until the market normalizes. If these travel restrictions and concerns over the outbreak continue for an extended period of time, they could have a material impact on the overall financial performance of the company.”
In addition, the company today introduced its 20>25 by 2025 program which is designed to give people throughout the company specific goals to work towards. The program includes several goals by 2025: delivering $20.00 adjusted earnings per share; further reducing the company’s carbon footprint by 25 percent; delivering strong returns on invested capital; and continuing to improve on record guest satisfaction and employee engagement metrics.
Full Year 2019 results:
For the full year, US GAAP Net Income was $1.9 billion or $8.95 per share and Adjusted Net Income was $2.0 billion or $9.54 per share versus US GAAP Net Income of $1.8 billion or $8.56 per share and Adjusted Net Income of $1.9 billion or $8.86 per share in 2018.
Gross Yields were up 8.2% in Constant-Currency (up 7.0% As-Reported). Net Yields were up 8.0% in Constant-Currency (up 6.7% As-Reported).
Gross Cruise Costs per Available Passenger Cruise Days (“APCD”) increased 8.7% in Constant-Currency (up 8.0% As-Reported). Net Cruise Costs (“NCC”) excluding Fuel per APCD were up 11.4% in Constant-Currency (up 10.8% As-Reported).
Full Year 2020 Guidance:
Wave season has started on a very robust basis with strong demand especially in the US and European markets.
As previously announced, the Wuhan Coronavirus and the efforts to contain it are expected to negatively affect results. While the company said it expected this to be temporary, the situation is highly fluid and the overall impact cannot reasonably be estimated at this time. Accordingly, guidance does not include any provision for the impact of the outbreak.
Net Yields are expected to increase 2.25% to 4.25% in Constant-Currency and 2.5% to 4.5% As-Reported.
NCC excluding Fuel per APCD are expected to increase 1.75% to 2.25% in both Constant-Currency and As-Reported basis.
Adjusted earnings are expected to be in the range of $10.40 to $10.70 per share.
20>25 by 2025 Program:
“These goals have been put in place to focus our leadership on achieving outsized improvements in our performance going forward. We believe that what gets measured gets better and – just like the Double-Double program – we believe that this 20>25 by 2025 program will help focus our people on the key success factors for our future,” the company said, in its earnings release.
“This program not only focuses on earnings and carbon footprint, it will also focus on further improving our guest satisfaction and employee engagement while continuing to deliver strong returns on invested capital.”
“We are pairing ambitious business and environmental goals because we all understand that businesses must do our part to meet the needs of all our stakeholders,” said Richard D. Fain, chairman and CEO. “Over the last years, our people have worked hard to deliver strong performance on both profitability metrics and important societal goals. This 20>25 by 2025 program should help take those efforts to the next level.”
Full Year 2019 Results:
US GAAP Net Income for the year was $1.9 billion or $8.95 per share and Adjusted Net Income was $2.0 billion or $9.54 per share. This result was achieved despite a series of extraordinary events including the drydock incident in the Grand Bahama shipyard, the cancellation of the cruises to Cuba and an unusual hurricane season, all of which negatively impacted the company’s results for the year.
Net Yields were up 8.0% in Constant-Currency. The consolidation of Silversea’s operations, the new cruise terminal in Miami, the Perfect Day development, new hardware and strong demand for our core products drove the year-over-year increase.
NCC excluding Fuel per APCD were up 11.4% in Constant-Currency. The main drivers behind the year-over-year increase were the consolidation of Silversea’s operations, the new cruise terminal in Miami, investments in our private destinations and technology, and more drydock days.
Q4 2019 Results:
US GAAP Net Income for the fourth quarter was $273.1 million or $1.30 per share and Adjusted Net Income was $297.4 million or $1.42 per share. Last year, US GAAP Net Income was $315.7 million or $1.50 per share, and Adjusted Net Income was $322.1 million or $1.53 per share. The negative impact of the cancellation of the sailings to Cuba and the disruption generated by Hurricane Dorian were the main drivers of the decline in the year-over-year results during the quarter.
Gross Yields were up 6.2% in Constant-Currency. Net Yields were up 6.8% in Constant-Currency, within guidance.
Gross Cruise Costs per APCD increased 9.6% in Constant-Currency. NCC excluding Fuel per APCD were up 15.9% in Constant-Currency, higher than guidance driven by marine costs and employee related expenses.
Additionally, lower depreciation expenses and a higher contribution from our joint ventures positively impacted the quarter’s performance vs. guidance.
Bunker pricing net of hedging for the fourth quarter was $468.4 per metric ton and consumption was 380,400 metric tons.
FULL YEAR 2020 GUIDANCE
The company said it is is very encouraged about the demand environment for 2020.
“Wave Season has started on a strong note with overall rates higher than same time last year and booked load factors ahead of same time last year on a like-for-like basis. The company’s new ships and new attractions are a major driver not only of revenue, but of the strength of its brands,” said a press release. “Demand for the core products is very strong across all quarters.Recent geopolitical events such as the brushfires in Australia and unrest in the Middle East have impacted demand for certain itineraries, but the strength of the core products has more than compensated.”
The company expects a Net Yield increase in the range of 2.25% to 4.25% in Constant-Currency and 2.5% to 4.5% As-Reported for the full year.
“Our yield outlook for 2020 is very encouraging with higher pricing on top of an exceptional 2019 performance,” said Jason T. Liberty, executive vice president and CFO. “It’s clear that the Coronavirus will impact revenue in China in the short term, but we are a long-term business and our plans to continue growing this profitable market remain unchanged. We are also very excited about the introduction of our 20>25 by 2025 goals. Our formula for success is simple and our path towards our EPS goal is driven by moderately growing our yields, effectively managing our costs and moderately growing our business. Meanwhile, our emissions target, which is one of our many sustainability initiatives, will further focus our world-class design, engineering and operations teams to meaningfully improve our environmental impact.”
NCC excluding Fuel are expected to be up 1.75% to 2.25 % in both Constant-Currency and As-Reported basis. Operating costs for the full year show continued good discipline, although the cadence of costs between quarters will vary. Costs in the first half of the year are expected to be higher than the second half driven by more drydock days and the timing of ship deliveries.
Excluding any impact from the Coronavirus and taking into account current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company estimates 2020 Adjusted EPS will be in the range of $10.40 to $10.70 per share.