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Weak Caribbean pricing, stronger dollar hurt RCL's Q4

Weak Caribbean pricing, stronger dollar hurt RCL's Q4

Royal Caribbean shares slumped in pre-market trading Thursday after fourth quarter earnings came in under Wall Street forecasts. The company reported 'a good, but typical wave season,' with load factors and average per diems both ahead of the same time last year, and raised its 2015 profit guidance.

A stronger US dollar, net of fuel, cost Royal Caribbean 7 cents per share in Q4, while net yields did not increase as much as expected, due to a weaker than anticipated Caribbean pricing environment.

Q4 profit was $109.8m, with adjusted net income at 32 cents per share, up from 23 cents a year ago but under the 42 cents expected by Wall Street. US GAAP net income was 49 cents per share. Net yields (constant currency) increased 2.7% versus guidance of 3.5%, driven by a weaker than anticipated Caribbean pricing environment. Revenue was $1.82bn, down from $1.85bn.

Adjusted profit for the full year 2014 was $755.7m, or $3.39 per share, compared to $539.2 million, or $2.44 per share, for 2013. 2014 US GAAP profit was $764.1m, or $3.43 per share. 

Net yields in 2014 increased 2.4% (constant currency). On-board revenue yields were up 3.8%.

During Q4, tax reform in Spain eliminated limitations on the carry forward period for previously recognized net operating losses. This resulted in a net income benefit of $33.5m, or 15 cents per share. This benefit had not been anticipated in the company's guidance and was excluded from adjusted EPS.

Royal Caribbean said bookings over the past three months have been higher than prior year levels, and the company is experiencing 'a good, but typical wave season.' Load factors and average per diems are both ahead of same time last year. The company's booked position at the end of 2014 was the best in Royal Caribbean's history.

The Caribbean pricing environment continues to be 'highly competitive' through the first quarter, but Royal Caribbean expects pricing to be up low single digits for the remainder of 2015. Net yields are projected to increase 2.5% to 4.5% (constant currency) and be down down 0.5% to up 1.5% (as reported) for the full year.

'On the revenue front, although the first quarter remains a challenge, we are pleased with the way our summer season in the Caribbean, Europe, China and Alaska is coming together,' cfo Jason Liberty said.

'On the expense side, our ongoing focus on driving efficiencies throughout the business provides us with the ability to keep our costs firmly in line with our Double-Double expectations while strategically investing in technology enhancements and growing markets, like China,' he added. Double-Double is a strategy to double profit and return on investment over a multi-year period.

Royal Caribbean now expects adjusted 2015 EPS in the range of $4.65 to $4.85, higher than previous guidance of $4.55. Since October, declining oil prices have had a positive impact of 59 cents per share while the strengthening US dollar has had a negative impact of 54 cents per share.

For Q1, adjusted EPS is expected in the range of 10 cents to 15 cents.

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