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Royal Caribbean ups coronavirus impact to 90 cents/share

Royal Caribbean Cruises Ltd. increased its estimated impact from coronavirus to 90 cents per share from 65 cents previously.

If the company were to cancel all its remaining sailings in Asia through the end of April, there would be an additional 30-cent per share impact on full year earnings.

30 sailings canceled to date

Royal Caribbean has canceled 30 sailings in Southeast Asia, up from 18 on Feb. 13, its previous update, and modified several itineraries in the region.

‘There are still too many variables and uncertainties regarding the impact of this outbreak on our business in Asia and elsewhere to reasonably forecast the full impact on our business, including what our yields and earnings for 2020 will be,’ the company said in a filing Tuesday. ‘These concerns and restrictions over the outbreak are impacting our bookings and are having, and are likely to continue to have, a material impact on our overall financial performance.’

Adverse impacts include ‘a drop in demand for cruises, guest cancellations, travel restrictions, an unavailability of ports and/or destinations, cruise cancellations, ship redeployments and an inability to source our crew, provisions or supplies from certain places.

Spread to Italy 'disconcerting'

‘Royal’s stock is already down 33% year-to-date on concerns related to the coronavirus impact, which we remain hopeful will prove to be a transitory issue,’ analyst Sharon Zackfia of William Blair said in a note. ‘While the current outbreak is unique and the spread to Italy is disconcerting as it could impact another key cruise market, we view the risk/reward profile as favorable for Royal’s shares at current levels given an already depressed price to earnings multiple of nine times our new 2020 estimate.’

Comparison to Costa Concordia impact

For perspective, Zackfia said RCL’s stock valuation bottomed at roughly eight times forward earnings after the Costa Concordia incident then rose about 50% in the subsequent year.

RCL closed at $89.55 Tuesday, down more than 7%.

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