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RCL shares shoot up 6% on strong Q1, higher guidance

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Royal Caribbean's stock gained more than 6% after first quarter earnings overshot expectations on strong close-in demand for Caribbean cruises and the company raised its full year guidance.

RCL shares traded as high as $110.60 before settling at $106.60, up 6.1%.

US GAAP and adjusted earnings were $214.7m, or 99 cents per share, up from US GAAP net income of 46 cents per share and adjusted net income of 57 cents per share a year ago. Revenues were $2bn, up from $1.9bn.

Royal Caribbean lifted its full year EPS guidance by a dime, to a range of $7 to $7.20 from $6.90 to $7.10. Q2 adjusted EPS is expected in the range of $1.60 to $1.65.

The business continues to progress as expected, Royal Caribbean chairman and ceo Richard Fain said. During the previous quarterly earnings call, RCL reported bookings were outstanding and predicted strong revenue growth in 2017 as a result.

Fain said that prediction is proving accurate, and the company continues to 'revel in strong daily booking reports.'

The main negative has been the China-Korea dispute that's put Korean ports off the charts for cruise ships. Itineraries were changed, and that is 'hurting,' reminiscent of the China-Japan dispute several years back.

'Fortunately, bookings in Europe and elsewhere have compensated,' Fain said.

Growing yields by 6% in Q1, which follows a 7% hike last year, is 'remarkable,' he told analysts during Friday's earnings call.

On-board revenue yield rose nearly 9%, driven by new hardware, shore excursions and high-speed Internet utilization (VOOM at Royal Caribbean International and Xcelerate at Celebrity Cruises).

CFO Jason Liberty said Royal Caribbean is booked ahead of the same time last year in occupancy and pricing for each remaining quarter, and the company has about 15% fewer passengers left to book than at this point last year.

Demand for European cruises has been particularly strong from North Americans so average per diems and load factor are 'significantly higher' than at the same time last year. Liberty said Americans typically pay more for a Europe cruise and buy more shore excursions.

Bookings from European source markets are strong. However, since the company has less inventory left to sell, it will end up carrying a greater mix of North Americans than in a usual Europe season.

North American itineraries are doing well, too. Alaska remains on track to outperform the 2016 record season, and the Caribbean—close to half of the company's capacity in 2017—is performing as expected. In the last three months, bookings and pricing have been above last year's level and Harmony of the Seas is commanding premium rates for its first summer Caribbean season.

In the Asia-Pacific region—approximately 20% of RCL capacity—China, Australia and Southeast Asia cruises are booked 'nicely higher' in load factor. Australia itineraries for next winter (austral summer) are in a strong booked position despite industry capacity growth.

Liberty said demand for China cruises decreased due to the Korea itinerary changes but that 'demand is returning to expected levels.'