CRUISE INDUSTRY

Royal Caribbean posts unexpectedly strong third-quarter results

 

hsampson@MiamiHerald.com

The world’s second-largest cruise company released better-than-expected earnings for the third quarter Thursday, offering some hope for an industry that has struggled against years of difficult headwinds.

Miami-based Royal Caribbean Cruises Ltd. raised its full-year earnings forecast due to greater demand in Europe — which has been a problem area in the past — and said bookings for 2014 were trending higher.

Analysts seemed pleasantly surprised by the results, and Wall Street responded: Shares of Royal Caribbean closed at $42.35, up 6.5 percent.

“We thought cruise companies would want to hedge on performance and keep quiet until a more complete picture of next year emerged, but clearly Royal has gained some traction (in our opinion, at the expense of some of its competitors) and the management team was excited to share the stabilization of demand,” Morningstar equity analyst Jaime Katz wrote in a note to investors.

Profits fell slightly to $365.7 million, or $1.65 per share, in the quarter from $367.8 million, or $1.68 per share, a year earlier. Adjusted earnings, which did not include $12.2 million in restructuring costs, were $1.71 per share, higher than analyst estimates that averaged $1.65.

Total revenue rose 3.5 percent to $2.31 billion, beating analysts’ average estimate of $2.26 billion due to last-minute bookings in Europe and Asia and increased spending aboard its ships.

The company said it expected net yields, a measure of ticket sales and money spent onboard, to rise about 3 percent in 2013. Net yields rose 2.6 percent in the third quarter ended Sept. 30, excluding currency fluctuations. That was fueled by a 7 percent increase in onboard revenue yields, which prompted one analyst to say: “I just want to know what you’re selling on those ships.”

The cruise industry has been rocked by a series of incidents dating back to January of 2012, when the Costa Concordia wrecked off the coast of Italy, killing 32 people. Earlier this year, as the busy booking season was underway, fire disabled the Carnival Triumph and left passengers in uncomfortable conditions for days as the ship was towed to port.

Royal Caribbean faced its own issues, though none as serious: In May, Royal Caribbean International’s Grandeur of the Seas suffered a fire, though the ship did not lose power. In August, a motor had to be replaced on the Celebrity Millennium, part of the Celebrity Cruises brand owned by the parent company. That issue forced the line to cancel several sailings stretching into September.

“We’ve shown our resilience in the face of the various events and we’re beginning to demonstrate the strength of our business model and the strength of our brands as the industry recovers from these headwinds,” Royal Caribbean Cruises chairman and CEO Richard Fain said during a conference call with investors.

Looking forward, the company said prices for the first quarter of 2014 remained steady from a year earlier and are up for the following quarters. But pricing in the Caribbean remains under pressure and advance bookings are weaker, the company said.

Royal Caribbean raised its full-year adjusted earnings forecast to $2.30-$2.35 per share from $2.20-$2.30 per share.

Analysts on average were expecting $2.28 per share, according to Thomson Reuters I/B/E/S.

“2013 has been a challenging year for our industry featuring significant adverse publicity, much of which has featured Caribbean cruising in a negative light,” said Adam Goldstein, president and CEO of Royal Caribbean International. “Given the reality of extraordinary customer satisfaction and assuming no further negative events, we anticipate a more positive consumer attitude towards cruising by the end of the first quarter as the industry laps the beginning of the onslaught of negative media coverage.”

This report was supplemented with information from the Reuters news service.

Read more Breaking News - Business stories from the Miami Herald

  • Friday's Sports In Brief

    Now that the majors are over, Adam Scott is going after the one big prize remaining this year — a shot at the $10 million FedEx Cup prize.

  • Lufthansa pilots' union threatens new strikes

    A union representing Lufthansa's pilots is threatening a new round of strikes in a long-running dispute over wages and early retirement benefits.

  •  
In this Aug 20, 2014 photo, guests eat at the new restaurant Nazdarovie during its pre-launch dress rehearsal in Havana, Cuba. Nazdarovie, which is named for the popular Russian toast and opened Friday, is a nod to nostalgia for the island's Soviet ties during the Cold War, a time when Moscow was Havana's main source of trade and aid and hundreds of thousands of Cubans traveled to the Eastern Bloc as diplomats and students.

    Havana retro-Soviet restaurant a nod to nostalgia

    There's no rice, beans or fried plantains at Havana's newest private restaurant. You can order a minty mojito, but it'll come mixed with vodka instead of the traditional white rum.

Miami Herald

Join the
Discussion

The Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

The Miami Herald uses Facebook's commenting system. You need to log in with a Facebook account in order to comment. If you have questions about commenting with your Facebook account, click here.

Have a news tip? You can send it anonymously. Click here to send us your tip - or - consider joining the Public Insight Network and become a source for The Miami Herald and el Nuevo Herald.

Hide Comments

This affects comments on all stories.

Cancel OK

  • Marketplace

Today's Circulars

  • Quick Job Search

Enter Keyword(s) Enter City Select a State Select a Category