Royal Caribbean Predicts a Profitable 2017

File image

By Reuters 2016-10-28 19:43:45

Royal Caribbean Cruises said it was confident of meeting its profit forecast for 2017, buoyed by strong bookings, indicating that the number two U.S. cruise operator had tided over what has been a turbulent year for the cruise industry.

Royal Caribbean's bookings for next year were up both in terms of pricing and volume, giving "added confidence" that the company could double its adjusted profit to $6.78 per share in 2017 from $3.39 in 2014, Chief Executive Richard Fain said.

Fain's comments come after a tough year for the cruise industry, which has been hit by a strong dollar and the Brexit vote, while contending with geopolitical events in Europe and the Zika virus scare that deterred travelers.

Analysts have also been concerned about pricing pressures in the Caribbean, the biggest market for cruise operators and one that had been plagued by overcapacity until the past few quarters.

However, Royal Caribbean appeared to brush aside these concerns, saying it would deploy more ships in the Caribbean next year, while slimming its Mediterranean operations where the migrant crisis and a spate of attacks have hit the industry.

Royal Caribbean's confidence in its forecast sent the company's shares up nearly 10 percent – on course for their best day in five years – and also lifted the shares of rivals Carnival Corporation and Norwegian Cruise Line.

However, it was not all smooth sailing for Royal Caribbean in the latest third quarter.

The company's revenue rose 1.6 percent to $2.56 billion, the slowest in six quarters and just under analysts estimates of $2.58 billion, according to Thomson Reuters I/B/E/S.

But, its adjusted profit of $3.20 per share beat analysts average estimate by 10 cents due to higher demand for its pricier North American cruises and as consumers spent more on beverages and WiFi on board.

A two percent decline in net cruise costs, excluding fuel, also helped prop up the company's profit in the quarter.

Royal Caribbean's net income tripled to $693.3 million in the third quarter ended Sept. 30 from $228.8 million a year earlier, which included a $399.3 million non-cash charge.

Net revenue yields, which take into account spending per available berth, rose 0.4 percent.