Royal Caribbean (RCL) Beats On Q4 Estimates On Both Counts

Royal Caribbean Cruises Ltd. (NYSE:RCL) posted better-than-expected fourth-quarter 2017 results.

Adjusted earnings of $1.34 per share surpassed the Zacks Consensus Estimate of $1.20 by 11.7% and grew 8.9% year over year on the back of higher revenues and lower fuel costs. The bottom line came in ahead of the guided range of $1.15-$1.20.

Total revenues of $2 billion beat the consensus mark of $1.98 billion by $29 million, up 4.9% from the year-ago quarter. This upside is driven by higher passenger ticket as well as onboard and other revenues.

Double-Double: A Special Mention

The company’s Double-Double program, aimed at attaining adjusted EPS of $6.78 (double the 2014 adjusted EPS of $3.39) and increasing return on invested capital (ROIC) to double-digit percentages in 2017, achieved its targets. Last year, the company reported EPS of $7.53 and ROIC rose to above 10%. Further, Royal Caribbean focuses on its new three-year program, designed to drive performance: 20/20 Vision.

We note that the cruise operator’s shares have soared 54.1% in a year’s time, significantly outperforming the industry’s 22.5% rally.

Quarterly Highlights

Passenger ticket revenues were up 4.9% to $1.42 billion and onboard and other revenues increased 5.2% to $584.1 million.

Royal Caribbean Cruises Ltd. Revenue (TTM)

Royal Caribbean Cruises Ltd. Revenue (TTM) | Royal Caribbean Cruises Ltd. Quote

On a constant currency basis, net yields rose 3.9% year over year, surpassing the mid-point of the guided range by 165 basis points (bps). This improvement came on the back of strong close-in demand for core products and better-than-expected onboard spend.

Net cruise costs (NCC) excluding fuel, grew 8.7% on a constant currency basis, more than management’s expectation of 8.5% increase. Notably, the rise in costs was mainly due to planned investments and relief efforts for the hurricanes.

Total cruise operating expenses inched up 2% year over year to nearly $1.15 billion, mainly due to growing food, Commissions, transportation, onboard and other plus payroll and related operating costs. This was however, partly offset by decreased fuel and other operating expenses.

1Q18 Guidance

For the first quarter of 2018, Royal Caribbean expects adjusted earnings per share at roughly 95 cents, lower than the Zacks Consensus Estimate of 98 cents.

Constant-currency net yields are projected in the range of 3-3.5% increase. NCC excluding fuel is likely to be up about 10% at constant currency.

2018 Guidance

For 2018, the company anticipates earnings in the band of $8.55-$8.75 per share. The mid-point of this guided range is higher than the Zacks Consensus Estimate of $8.57.

The company expects net yields in the band of 1.5-3.5% on a constant currency basis.

NCC excluding fuel on a constant-currency basis is expected to be up 1.5-2%. Meanwhile, management noted to have been experiencing strong early booking trends for 2018.

Zacks Rank and Stocks to Consider

Royal Caribbean carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Consumer Discretionary sector are Melco Resorts & Entertainment (NASDAQ:MLCO) , Boyd Gaming Corp. (NYSE:BYD) and Hilton Worldwide Holdings (NYSE:HLT) , each with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Melco Resorts, Boyd Gaming and Hilton are expected to witness a respective 19.8%, 31.2% and 32.7% increase in 2018 earnings.

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