Royal Caribbean Cruises posts profit, shows optimism for strong 2014
On the same day one of its ships was heading home early due to an illness outbreak, Royal Caribbean Cruises released positive quarterly and full-year earnings.
01/27/2014 4:55 PM
01/27/2014 10:24 PM
Despite a slow early start to the busy cruise booking season and a significant outbreak of illness on one of its ships, Royal Caribbean Cruises Ltd. said Monday it expects business this year to improve compared to a tough 2013.
“It’s been an interesting time in the cruise industry and I don’t have to tell you how pleased we are to see us emerging from it,” said Richard Fain, the company’s chairman and CEO, in a call with analysts.
The Miami-based cruise operator reported fourth-quarter profits of $7 million, compared to a nearly $393 million loss during the same quarter in 2012, and full-year net income of nearly $474 million for 2013. That’s a huge leap over profits of about $18.3 million in 2012.
Revenues came in at $1.8 billion for the quarter and nearly $8 billion for the full year. Net yields, or revenue per capacity day, increased 3.8 percent for the quarter and 3.2 percent for the full year on a constant-currency basis. Net cruise costs, excluding fuel, increased 1.8 percent for the quarter and year.
Shares of Royal Caribbean closed at $48.04 Monday, up nearly 2 percent from Friday’s close.
Performance was driven by a 7.6 percent increase in onboard revenue for 2013 and strong late bookings, especially in Europe and Asia. Royal Caribbean Cruises includes Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises and several European brands.
Adjusted net income was $530.6 million, which did not include nearly $57 million of restructuring costs and charges related to the pending sale of Spanish brand Pullmantur’s non-core operations. Adjusted earnings per share for the year were $2.40, which beat the company’s most recent forecast as well as Wall Street expectations.
Fain called the results “a remarkable feat,” especially considering the harsh publicity that surrounded the disabling fire of the Carnival Triumph last February. Royal Caribbean also had a fire later in the year, though its ship did not lose power.
“None of us imagined that the industry would be subjected to so much negative coverage,” Fain said. “That much bad news would threaten any industry, but our team worked hard to overcome the challenges.”
Royal Caribbean has had its own share of negative publicity recently, first with a small number of passengers and crew on Majesty of the Seas struck with gastrointestinal illness and then with a much larger outbreak of a similar illness aboard Explorer of the Seas. That ship is returning to New Jersey on Wednesday, two days earlier than scheduled, to allow for a thorough cleaning.
New information posted Monday afternoon by the U.S. Centers for Disease Control and Prevention said 595 passengers, or more than 19 percent of the guests on board, got sick. Fifty crew members, slightly more than 4 percent of the 1,167 on board, became ill.
The earliest figures from the CDC indicated that 281 passengers and 22 crew members had been sickened.
Asked about the outbreak during Monday’s conference call with analysts, Royal Caribbean International President and CEO Adam Goldstein said the company feels “very badly” for the passengers who got sick.
“This has been a difficult situation and both a considerable and a rare outbreak of what appears to be norovirus,” he said. But he said the illnesses aren’t expected to seriously hurt the company’s business performance.
“We don’t expect that the impact of this event will be significant or meaningful to the company or its results,” he said. “But it is obviously meaningful to the customers who have experienced illness and so we’re doing everything we can do to make the ship as clean as possible and the rest of the cruise as enjoyable as we can.”
Analysts were pleased with the company’s financial results, but at least one worried about the impact of the new wave of publicity.
“We still believe that Royal benefited at Carnival’s expense in 2013, but are concerned with recent negative media coverage that this could reverse in the current wave period, a critical booking time for the business,” Morningstar equity analyst Jaime Katz wrote in a note to investors.
The company said it entered the year with 5 percent more revenue on the books than the same time last year. And the outlook for 2014 is strong: Royal Caribbean expects adjusted earnings per share to be in the range of $3.20 to $3.40.
But the first week of the busy booking time known as “wave season” was softer than the previous year, likely due to winter storms in the beginning of the year.
“The weather was so nasty that it actually affected the first week of wave in a negative way,” Goldstein said. “It still stands to reason that if this cold snap goes on and on and on, people will eventually be more inclined to have something on the books in a warmer climate than what they’re experiencing at home.”
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