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Why Is Royal Caribbean (RCL) Up 21.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Royal Caribbean (RCL - Free Report) . Shares have added about 21.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Royal Caribbean due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Royal Caribbean Q2 Earnings Lag Estimates, Revenues Top

Royal Caribbean  reported second-quarter 2020 results, wherein earnings missed the Zacks Consensus Estimate but revenues surpassed the same. While the top line beat the consensus mark after missing in the preceding three quarters, the bottom line missed the same for the second straight quarter. Moreover, both the metrics declined sharply year over year due to the coronavirus pandemic.

The company reported adjusted loss per share of $6.13, wider than the Zacks Consensus Estimate of a loss of $4.71. In the prior-year quarter, the company had reported adjusted earnings per share of $2.54 per share.

Total revenues were $175.6 million, beating the consensus mark of $52 million. However, the figure declined 93.7% from the year-ago quarter. Due to the pandemic, the company suspended its global cruise operation beginning Mar 13, 2020, which resulted in the cancellation of all of the company's second-quarter sailings.

During suspension of operations, the company anticipates cash burn in the range of nearly $250 million to $290 million per month.

Quarterly Highlights

Passenger ticket revenues decreased 94.7% to $107 million, while onboard and other revenues declined 91.3% to $68.6 million.

Total cruise operating expenses were $680.4 million, compared with $1,544.5 million at the end of second-quarter 2020.

Other Financial Information

As of Jun 30, 2020, the company had cash and cash equivalents of approximately $4.1 billion.

The company announced that as of Jun 30, 2020, the anticipated debt maturities for the remainder of 2020 and 2021 are $0.3 billion and $1.3 billion, respectively.

Capital expenditure for remainder of 2020 and 2021 are anticipated to $0.6 billion and $1.8 billion, respectively.

Guidance

Due to the pandemic, the company has withdrawn guidance. The company is unable to estimate the financial losses owing to the coronavirus as the magnitude and duration of the same remains uncertain.

The company announced interest expenses for the remainder of the year (Jul 1, 2020 through Dec 31, 2020) in the range of $505-$515 million.

The pandemic have significantly impacted the bookings for remainder of 2020. However, bookings for 2021 is trending well and is within historical ranges.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -14.55% due to these changes.

VGM Scores

At this time, Royal Caribbean has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Royal Caribbean has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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