The company is experiencing strong early booking trends for 2020. Rates are higher than same time last year in all four quarters, booked load factors are ahead of same time last year on a like-for-like basis and the booking window has extended.
MIAMI – Royal Caribbean Cruises Ltd. reported record third quarter US GAAP earnings of $4.20 per share and adjusted earnings of $4.27 per share which include a $0.13 negative impact from Hurricane Dorian. The company also updated its full year Adjusted EPS guidance to a range of $9.50 to $9.55 per share, which includes a negative impact of approximately $0.15 per share from Hurricane Dorian.
"Our business continues to thrive and exceed our expectations," said Richard D. Fain, chairman and CEO. "While Hurricane Dorian had a negative impact, stronger demand for our brands and our key itineraries exceeded our expectations. Excluding the hurricane impact, we are not only able to maintain our yield and earnings guidance, but to raise both slightly as a result of particularly strong performance in the US and China."
Key Highlights
Third Quarter 2019 Results:
- US GAAP Net Income was $883.2 million or $4.20 per share and Adjusted Net Income was $896.8 million or $4.27 per share. These results include the negative impact of approximately $27 million or $0.13 per share from itinerary disruptions and relief efforts related to Hurricane Dorian. Last year, US GAAP Net Income was $810.4 million or $3.86 per share, and Adjusted Net Income was $836.3 million or $3.98 per share.
- Gross Yields were up 6.6% in Constant-Currency (up 5.4% As-Reported). Net Yields were up 6.4% in Constant-Currency (up 5.2% As-Reported).
- Gross Cruise Costs per Available Passenger Cruise Days increased 7.5% in Constant-Currency (up 6.7% As-Reported). Net Cruise Costs excluding Fuel per APCD were up 11.0% in Constant-Currency (up 10.4% As-Reported).
- These yield and cost metrics have not been adjusted to separate out the impact of Hurricane Dorian.
Full Year 2019 Outlook:
- Adjusted earnings for the full year are expected to be in the range of $9.50 to $9.55 per share. This range includes the negative impact of approximately $0.15 per share from itinerary disruptions and relief efforts related to Hurricane Dorian.
- Net revenue yields are expected to increase approximately 8.0% in Constant-Currency and approximately 6.75% As-Reported.
- NCC excluding Fuel per APCD are expected to be up approximately 11.0% in Constant-Currency (up approximately 10.5% As-Reported).
Hurricane Impact
Hurricane Dorian had an unusual, one-time impact on our financial performance. Three main Florida embarkation ports closed on a weekend as a precautionary measure. These measures impacted 16 sailings and made this the most disruptive storm in the company's history. The financial impact was particularly large because the affected ships included our very successful Oasis-class, because we closed Perfect Day at Cococay for 10 days, and because of our extensive relief efforts. The combination of guest compensation, the closure of Perfect Day at Cococay and the relief efforts negatively impacted the third quarter by $27 million or $0.13 per share and the full year by approximately $30 million or $0.15 per share.
THIRD QUARTER 2019
US GAAP Net Income for the third quarter of 2019 was $883.2 million or $4.20 per share and Adjusted Net Income was $896.8 million or $4.27 per share. These results include the negative impact of $27 million or $0.13 per share from itinerary disruptions and relief efforts related to Hurricane Dorian. Last year, US GAAP Net Income was $810.4 million or $3.86 per share, and Adjusted Net Income was $836.3 million or $3.98 per share.
Gross Yields were up 6.6% and Net Yields were up 6.4% in Constant-Currency, slightly better than guidance when considering the impact of the hurricane which reduced revenue by $21 million and slightly reduced yields.
Gross Cruise Costs per APCD increased 7.5% in Constant-Currency. NCC excluding Fuel per APCD were up 11.0% in Constant-Currency. The reduction in capacity and relief efforts related to the hurricane negatively impacted this metric by 150 basis points. Absolute costs for the quarter were significantly better than expected, due to timing.
Bunker pricing net of hedging for the third quarter was $469.93 per metric ton and consumption was 379,600 metric tons.
Full year 2019 outlook
The company expects full year Adjusted EPS to be in the range of $9.50 to $9.55 per share. This range includes the negative impact of approximately $0.15 per share from Hurricane Dorian. Excluding this impact, we are increasing the midpoint of our guidance by $0.08 per share.
The company expects a Net Yield increase of approximately 8.0% in Constant-Currency and approximately 6.75% As-Reported. The company's booking strength has completely offset the negative yield impact related to Hurricane Dorian.
NCC excluding Fuel per APCD are expected to be up approximately 11.0% in Constant-Currency and up approximately 10.5% As-Reported. The increase in this updated guidance is driven by the reduction in capacity and relief efforts from the hurricane together with a further increase in technology and product development investments. These expenses are being offset by expected favorability from activities below the line.
Taking into account current fuel pricing, interest and currency exchange rates, and the factors detailed above, the company estimates 2019 Adjusted EPS will be in the range of $9.50 to $9.55 per share.
"2019 is shaping up to be another year of solid yield growth and record earnings despite some unusual headwinds," said Jason T. Liberty, executive vice president and CFO. "As we enter 2020, we are particularly enthusiastic about the new ship deliveries, the development of new destinations, our fleet modernization and technology initiatives. These investments will help us deliver even greater vacations while generating higher yields and better returns."
FOURTH QUARTER 2019
Net Yields are expected to be up approximately 6.75% in Constant-Currency and approximately 6.25% As-Reported. These metrics include approximately 300 basis points from the operation of Silversea, the new cruise terminal and the Perfect Day development. These Net Yields were negatively impacted by approximately 140 basis points related to the abrupt discontinuation of the Cuba sailings.
NCC excluding Fuel per APCD for the quarter are expected to increase approximately 14.5% in Constant-Currency and approximately 14.25% As-Reported. These metrics include approximately 300 basis points from the operation of Silversea, the new cruise terminal and the Perfect Day development. As it relates to the year-over-year cadence, the fourth quarter includes a higher number of drydocks affecting the cost metric by approximately 600 basis points. Costs for the quarter are also impacted by the timing of expenses from the previous quarter, a further increase in technology and product development investments and relief efforts related to the hurricane. These expenses are expected to be partially offset by anticipated favorability from activities below the line.
Based on current fuel pricing, interest and currency exchange rates and the factors detailed above, the company expects fourth quarter Adjusted EPS to be approximately $1.40 per share.
2020 outlook
The company is experiencing strong early booking trends for 2020. Rates are higher than same time last year in all four quarters, booked load factors are ahead of same time last year on a like-for-like basis and the booking window has extended. The market response to Celebrity Apex which will debut in April; Odyssey of the Seas to be delivered in the fall, and Silversea Moon and Silversea Origin to be delivered during the summer, has been excellent. The company is particularly excited with the demand for Perfect Day at Cococay, its private destination in the Bahamas, which has been opening in phases since May 2019. While still early in the booking cycle, the view for 2020 is encouraging and the company expects another year of solid yield and earnings growth.
FUEL EXPENSE AND SUMMARY OF KEY GUIDANCE STATS
Fuel Expense
The company does not forecast fuel prices and its fuel cost calculations are based on current at-the-pump prices, net of hedging impacts. Based on today's fuel prices, the company has included $176 million and $696 million of fuel expense in its fourth quarter and full year 2019 guidance, respectively.
Forecasted consumption is 60% hedged via swaps for the remainder of 2019 and 55%, 30%, 19% and 5% hedged for 2020, 2021, 2022 and 2023, respectively. For the same five-year period, the annual average cost per metric ton of the hedge portfolio is approximately $380, $430, $463, $554 and $580, respectively.
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She holds a Bachelor's degree in Communication & Mass Media from Panteion University of Political & Social Studies of Athens and she has been editor and editor-in-chief in various economic magazines and newspapers.
