Royal Caribbean sees profits rise, but misses expectations

Royal Caribbean Cruises had good news and bad news when it released fourth-quarter earnings Thursday.

Profits for the quarter and full year were up in 2014, which chairman and CEO Richard Fain described as “a record-breaking year.” The Miami-based company closed out the year with more future business on the books than ever before.

“Starting the year with fewer berths to fill really helps us raise our yields as the year progresses,” Fain said in a conference call with analysts.

But demand for the crowded Caribbean proved lethargic in the quarter that ended Dec. 31, with weakness continuing into the busy first-quarter “wave” season when operators expect travelers to plan cruise vacations for the rest of the year. And while lower fuel prices helped the bottom line, the negative effect of the strong dollar was an even more potent force.

“The year ended on a slightly schizophrenic note,” Fain said.

The company closed the quarter with profits of nearly $110 million, or 49 cents a share, on revenues of more than $1.8 billion. Adjusted net income was $70 million or 32 cents a share, below analyst expectations and the company’s own guidance.

While ticket revenues increased about a percent to $1.3 billion for the quarter, onboard and other revenues dropped nearly 8.9 percent to $514 million, resulting in a dip of about 2 percent in total revenue.

For all of 2014, net income was $764.1 million. Adjusted profits were nearly $756 million, or $3.39 per share, missing analyst forecasts of $3.49 a share and the company’s expectations of $3.45. Full-year revenues were up about 1.4 percent to $8.07 billion.

Shares of Royal Caribbean closed at $77.29, down 5.51 percent from the previous day’s close.

Fain described the booking season so far as “good, solid and typical,” and said the cruise company expects strong business after the Caribbean-intensive first quarter ends. For the rest of the year, more capacity will be deployed to higher-earning regions including Asia, Europe and Alaska. For 2015, the company is anticipating earnings per share of $4.65-$4.85.

While analysts were disappointed by the continued Caribbean struggles, several seemed cautiously optimistic about the outlook for the rest of the year.

“The first quarter is acting as the drag on full year 2015 potential, as Royal has 70% of its capacity there during the period,” Morningstar equity analyst Jaime Katz wrote in a note to investors. “Once repositioning resumes, the remainder of the year captures tailwinds from its other geographies, including Asia (15% of 2015 capacity), whose yields are expected to rise low- to mid-single-digits (lower than we previously expected).”

This story was originally published January 29, 2015 at 6:16 PM with the headline "Royal Caribbean sees profits rise, but misses expectations."