Edwards adjusted estimates for Royal Caribbean downward after the company's earnings report, and both are maintaining their Buy rating. Royal Caribbean estimates net yields will be up 2%-4% in the first quarter, but both UBS and AGE view that as optimistic.
UBS predicts only partial recovery in net yield during 2003: an uptick of 1.5%. 'If Q1 comes in with net yields up 4%, then RCL is on its way to the partial recovery we look for in '03 yields,' writes analyst Robin Farley.
UBS is lowering its 2003 estimate to $1.95 from $2.08 to partially account for the additional cancelled Infinity cruise but in larger part due to higher expenses this year. UBS's price target based on 12x forward EPS goes to $23 from $25. 'While management indicated it is comfortable with the consensus figure of $2 in EPS, we may be more cautious than management about yield increases in 2003. Separately, we are establishing our EPS estimate for 2004 of $2.18, which assumes flat yields in 2004,' Farley notes.
AGE sees Royal Caribbean's earnings progress as limited in the first quarter given higher fuel, insurance and marketing costs plus the inclusion of the Brilliance of the Seas operating lease. AGE is reducing 2003 and '04 estimates to $1.83 from $2.10 and to $2.45 from $2.55 respectively and maintaining a 12-month price objective of $27. 'We believe that if the pending war with Iraq is speedily and positively resolved, consumer confidence will quickly rebound producing higher year-over-year pricing and nicely positive YoY yields,' writes analyst Tim Conder.