Royal Caribbean (RCL) Beats On Q3 Earnings, Lags Revenue

Royal Caribbean Cruises Ltd. (NYSE:RCL) posted mixed third-quarter 2016 results, wherein the bottom line outpaced the Zacks Consensus Estimate while the top line lagged the same.

Adjusted earnings of $3.20 per share were 3.2% ahead of the Zacks Consensus Estimate which was the same as management’s guided $3.10. The outperformance came on the back of strong yields and positive movements in currency and fuel. Further, earnings increased 12.7% from the year-ago tally of $2.84 due to higher revenues and a lower share count.

Total revenue increased 1.6% year over year to $2.53 billion, driven by higher onboard spending as well as passenger ticket revenues. However, revenues missed the Zacks Consensus Estimate of $2.58 billion by 0.7%.

Quarter Highlights

On a constant currency basis, net yields increased 2.9% year over year, better than the guidance primarily on the back of strong close-in demand for North American itineraries.

Passenger ticket revenues were up approximately 1.4% to nearly $1.90 billion. Onboard and other revenues also increased 2.3% to $663.8 million.

Net cruise costs (NCC), excluding fuel, decreased 1.6% on a constant currency basis, and were in line with management’s guidance.

Total cruise operating expenses decreased 3.4% year over year to $1.34 billion mainly due to a decline in fuel, payroll and related as well as onboard and other expenses. The decrease was partly offset by higher food costs.

Q4 Guidance

Royal Caribbean expects adjusted earnings per share of $1.20 per share in the quarter, below the Zacks Consensus Estimate of $1.25 per share.

Constant-currency net yields are projected to increase roughly 6%.

NCC, excluding fuel, is likely to be down about 1.5% at constant currency.

2016 Guidance

Royal Caribbean’s reiterated its adjusted EPS guidance in the range of $6.00–$6.10. The Zacks Consensus Estimate for 2016 is pegged at $6.00.

The company expects net yields to increase about 4% or more for the full year. Strong close-in demand trends for North American itineraries in the third quarter is offsetting an impact from the delayed opening of Empress of the Seas sailings during the fourth quarter.

NCC, excluding fuel, on a constant currency basis, is still expected to be up 1%.

2017 View

At this point of time, the company’s 2017 itineraries are booked ahead of last year in both rate and volume. New ships including Harmony of the Seas and Ovation of the Seas are witnessing strong trends, thereby lending support to a solid outlook for next year.

Zacks Rank & Stocks to Consider

Royal Caribbean presently has a Zacks Rank #4 (Sell). Better-ranked stocks in the sector include Peak Resorts, Inc. (NASDAQ:SKIS) , Vail Resorts Inc. (NYSE:MTN) and Pool Corp. (NASDAQ:POOL) . While Peak Resorts and Vail Resorts sport a Zacks Rank #1 (Strong Buy), Pool carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Peak Resorts’ fiscal 2017 earnings climbed 27.8% over the last 60 days. Further, for fiscal 2017, EPS is expected to grow a staggering 200%.

Vail Resorts’ posted positive earnings surprises in three of the last four quarters, with an average beat of 2.22%. The Zacks Consensus Estimate for Vail Resorts’ fiscal 2017 earnings moved up 6.5% over the last 60 days.

Pool’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 189.93%. Further, for 2016, EPS is expected to grow 18.9%.

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