Royal Caribbean Seen Posting its First Profit in 3 Years

Key Takeaways

  • Analysts anticipate adjusted earnings of $0.33 per share vs. a lack of $4.91 a share in Q3 2021.
  • The cruise line’s 64-ship fleet is totally operational once more, serving all its pre-pandemic locations apart from China.
  • Demand and pricing have recovered, although Royal Caribbean stays saddled with debt after halting cruises throughout the pandemic.

Royal Caribbean Cruises Ltd. (RCL) is anticipated to put up its first quarterly revenue in virtually three years as income surges seven-fold to the best in 12 quarters amid a rebound in cruise demand.

The corporate in all probability swung to a revenue of 33 cents a share from a $4.91 per-share loss a yr in the past, its first optimistic outcome since simply earlier than the pandemic, in line with the common estimate of analysts tracked by Seen Alpha. Income is anticipated to rise to $3 billion, the best because the third quarter of 2019. The cruise line’s occupancy price is anticipated to get better to 93%, greater than double the 36% degree within the year-ago quarter.

Demand for cruises is anticipated to stay wholesome following their suspension for greater than a yr as a result of COVID-19. Royal Caribbean stated in July that bookings for the second half of this yr have been beneath historic ranges as measured by occupancy, although at larger costs than earlier than the pandemic. The corporate stated bookings for subsequent yr have been at historic ranges and at file costs.

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It is not all a reasonably image. Royal Caribbean will in all probability wrestle to cut back its $23 billion debt load, which ballooned because it suspended operations throughout the pandemic. In August, the corporate offered $1.25 billion of junk bonds and offered extra debt in October. The corporate borrowed at charges as excessive as 11.625%.

Royal Caribbean shares fell 41% previously yr, in contrast with a 16% drop within the S&P 500 index.

Supply: TradingView

Royal Caribbean Earnings Historical past

Royal Caribbean posted not less than 4 years of quarterly revenue progress, outlined by adjusted earnings per share, till the final quarter of 2019. It then misplaced cash for 10 straight quarters by this yr’s second interval.

Royal Caribbean’s income rose for not less than 16 straight quarters by the top of 2019, then declined for six quarters in a row by the second quarter of 2021, when it staged a rebound.

Royal Caribbean Key Stats

  Estimate for Q3 FY 2022 Q3 FY 2021 Q3 FY 2020
Earnings Per Share ($) 0.33 -4.91 -5.62
Income ($B) 3.0 0.5 -0.03
Occupancy(%) 92.9 36.4 N/A

Supply: Seen Alpha

The Key Metric

Royal Caribbean calculates its occupancy, also referred to as load issue, by dividing the variety of passenger cruise days by accessible passenger cruise days. Royal Caribbean’s occupancy was constantly above 100% within the years earlier than the COVID-19 pandemic as a result of some cabins have been shared by three passengers. Occupancy fell to a quarterly low of 28% final yr and recovered to 82% on this yr’s second quarter. Royal Caribbean’s fleet of 64 cruise ships incurs main financing and working prices. Consequently, excessive occupancy charges are key to the corporate’s profitability.