Royal Caribbean (RCL) Beats On Q1 Earnings, Lifts '17 View

Royal Caribbean Cruises Ltd. (NYSE:RCL) posted mixed first-quarter 2017 results, wherein the bottom line outpaced the Zacks Consensus Estimate while the top line lagged.

Adjusted earnings of 99 cents per share were 7.6% ahead of the Zacks Consensus Estimate and 10% ahead of management’s guidance of 90 cents. The outperformance primarily came on the back of strong close-in demand for the Caribbean. Further, earnings jumped a significant 73.7% from the year-ago tally of 57 cents, due to higher revenues and a lower share count.

Total revenue increased 4.7% year over year to $2.01 billion, driven by higher passenger ticket revenues as well as better onboard spending. However, revenues missed the Zacks Consensus Estimate of $2.02 billion by 0.6%.

Quarter Highlights

On a constant currency basis, net yields increased 6% year over year, better than guidance.

Passenger ticket revenues were up roughly 2.9% to nearly $1.42 billion, while Onboard and other revenues increased 9.4% to $590.3 million.

Net cruise costs (NCC), excluding fuel, decreased 4.4% on a constant currency basis almost in line with than management’s guidance of a decline of about 4.5%.

Also, total cruise operating expenses decreased 5.3% year over year to nearly $1.18 billion, mainly due to a decline in commissions, transportation and other costs, food, payroll and related as well as other operating costs. The decrease was partly offset by higher fuel, and onboard and other expenses.

2Q17 Guidance

For the second quarter, Royal Caribbean expects adjusted earnings per share in the range of $1.60 to $1.65. The Zacks Consensus Estimate of $1.40 per share is below the guidance.

Constant-currency net yields are projected to increase in the range of 10-10.5%. Robust demand for European and North American products, the deconsolidation of Pullmantur and new hardware being the key drivers of the expected yield improvement in the quarter.

NCC, excluding fuel, is likely to be down about 2% at constant currency. Notably, the absence of new ship launches and less drydock expenses are driving a reduction in costs as compared with the prior year.

2017 Guidance Updated

The company now anticipates earnings in the band of $7 to $7.20 per share, up from the earlier guided range of $6.90–$7.10. The Zacks Consensus Estimate for 2017 is pegged at $7.04.

The company expects net yields to increase in the range of 4.5% to 6% (earlier 4-6%), on a constant currency basis, for the full year.

NCC, excluding fuel, on a constant currency basis, is expected to be flat to up slightly. Previously, the company expected the same to be flat.

The company stated that bookings have been strong since the start of the year and the trend is likely to continue.

Zacks Rank & Key Picks

Royal Caribbean currently holds a Zacks Rank #2 (Buy). Other top-ranked stocks in the sector include Live Nation Entertainment, Inc. (NYSE:LYV) , The Marcus Corp. (NYSE:MCS) and Pool Corp. (NASDAQ:POOL) carrying the same Zacks Rank as Royal Caribbean. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Live Nation’s trailing four-quarter average positive surprise is 23.56%. The Zacks Consensus Estimate for Live Nation’s 2017 earnings moved up 90% over the last 60 days.

The Zacks Consensus Estimate for Marcus’ 2017 earnings climbed 5.3% over the last 60 days. Further, for 2017, EPS is expected to grow 16.2%.

Pool’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 7.57%. Further, for 2017, EPS is expected to grow 21.4%.

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