Royal Caribbean Cruises Ltd. (NYSE: RCL) today reported record third quarter results of $3.49 per share, which includes a $0.20 negative impact from the recent hurricanes; updated full year guidance to a range of $7.35 to $7.40, which includes a $0.26 negative impact from the recent hurricanes; and introduced its new three-year program designed to further drive performance: 20/20 Vision.
KEY HIGHLIGHTS
Third Quarter 2017 results:
- US GAAP and Adjusted Net Income were $752.8 million or $3.49 per share. Last year, US GAAP Net Income was $693.3 million, or $3.21 per share, and Adjusted Net Income was $690.9 million, or $3.20 per share.
- Gross Yields were up 5.6% on a Constant-Currency basis (up 6.2% As-Reported). Net Yields were up 5.3% on a Constant-Currency basis (up 5.9% As-Reported).
- Gross Cruise Costs per APCDs increased 5.2% on a Constant-Currency basis (5.6% As-Reported). Net Cruise Costs (“NCC”) Excluding Fuel per APCDs were up 5.7% on a Constant-Currency basis (up 6.0% As-Reported).
Full Year 2017 Forecast:
- Adjusted earnings per share are expected to be in the range of $7.35 to $7.40 per share. This includes a $0.26 negative impact from the recent hurricanes.
- Net Yields are expected to increase approximately 6.0% on a Constant-Currency and As-Reported basis.
- NCC Excluding Fuel per APCDs are expected to be up approximately 2.0% on a Constant-Currency and As-Reported basis.
Outlook
The unprecedented series of hurricanes this summer devastated many people and places in Texas, Florida and the Caribbean and our sympathies go out to all those who suffered and are suffering losses. The repair and recovery efforts have been intense and most of the affected destinations served by our cruise ships have already been reopened or are about to be reopened. Financially, the storms were unusually impactful because of when and where they hit and the net effect was a cost to the company in excess of $55 millionor $0.26 per share. Most of this impact was from lost revenue, but there were also direct costs associated with the storms and with the company’s humanitarian efforts. In addition, there were significant timing shifts across a wide range of activities as expenses were shifted between quarters to adjust to the storms. Nevertheless, the company still expects to generate earnings for the year within the increased range of guidance provided prior to the storms.
“We are only weeks away from crossing the finish line of our Double-Double program and I want to thank all of our employees for their remarkable efforts,” said Richard D. Fain, chairman and CEO. “The recent storms presented extraordinary challenges and I am extremely proud of the generosity, strength of character and sense of social responsibility displayed by our employees and the industry as a whole.”
20/20 Vision:
Our 20/20 Vision will continue to leverage the culture and discipline instilled by the Double-Double program. As part of our 20/20 Vision, we look to improve our already excellent guest satisfaction and employee engagement, while delivering our environmental commitments. These operational drivers are expected to further strengthen the foundation of the company and help deliver double-digit adjusted earnings per share by fiscal 2020, while further improving on our double-digit Return on Invested Capital.
“20/20 Vision will serve as a guiding light for the organization over the next three years. The program builds on our proven formula for success: modest yield growth, strong cost control and moderate capacity growth, while incorporating key operational drivers of our long-term progress,” said Fain.
THIRD QUARTER RESULTS
US GAAP and Adjusted Net Income for the third quarter were $752.8 millionor $3.49 per share, better than previous guidance. Last year, US GAAP Net Income was $693.3 million, or $3.21 per share, and Adjusted Net Income was $690.9 million, or $3.20 per share.
Gross Yields were up 5.6% on a Constant-Currency basis. Net Yields were up 5.3% on a Constant-Currency basis. This was better than previous guidance due to strong close in booking and pricing trends on China, Europe, and North American itineraries. While the hurricanes had a negative impact on overall revenue, they were neutral to Net Yields in the third quarter.
Gross Cruise Costs per APCDs increased 5.2% on a Constant-Currency basis. Net Cruise Costs (“NCC”) Excluding Fuel per APCDs were up 5.7% on a Constant-Currency basis. The reduction in capacity due to the hurricanes mainly drove the increase in the cost metric relative to guidance. Absolute costs for the quarter were better than expected, mainly due to timing.
Favorable trends in fuel, in both price and consumption, also provided a benefit to the quarter. Bunker pricing net of hedging for the third quarter was $498.55 per metric ton and consumption was 322.4 metric tons.
“Delivering record earnings during a period of such unprecedented disruption is a testament to the strength in demand for cruising and for our brands,” said Jason T. Liberty, executive vice president and CFO. “Strong demand trends coupled with our continued cost discipline have put us in a strong position to successfully complete our Double-Double program. As a matter of fact, I am pleased to report that we have already achieved our Double-Double targets on a trailing twelve month basis through September 2017.”