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Here's Why Royal Caribbean is Sailing Away After Earnings

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On Thursday, shares of popular cruise liner Royal Caribbean Cruises (RCL - Free Report) are gleefully sailing away, up around 9.2% in afternoon trading on refreshing fourth quarter financial results. RCL stock even hit a new 52-week high of $95.86.

Royal Caribbean reported earnings of $1.23 per share, beating the Zacks Consensus Estimate of $1.22 per share. Investors should note that this figure excludes 2 cents from non-recurring items. Full-year fiscal 2016 adjusted earnings were $6.08 per share, compared to year-over-year earnings of $4.83 per share.

Revenues came in at $1.91 billion, but lagged behind our consensus estimate of $1.96 billion and gained a slight 0.4% year-over-year. The company’s full-year revenue of $8.64 billion was higher than Wall Street’s forecast of $8.56 billion.

A 4% increase in revenues that were generated once passengers came on board Royal Caribbean’s ships helped to offset a 1% dip in passenger ticket revenue, which accounted for 71% of the total revenue mix.

On a constant currency basis, net yields were up 5.3% year-over-year, which was lower than the guidance. Net cruise costs (NCC), excluding fuel prices that decreased 1.9% on a constant currency basis, came in better than the guidance.

"As we enter our DOUBLE-DOUBLE year, we have never been so well positioned," said Richard D. Fain, chairman and chief executive officer.  "This program has done what it set out to do – bookings are at record levels, the preference our brands enjoy has never been stronger, we are on the cusp of investment grade ratings, our dividends are at an all-time high, costs have been well managed, and our guests' satisfaction has never been better."

What really sent RCL stock soaring, however, was its blowout full-year 2017 outlook. Royal Caribbean expects adjusted earnings to fall in the range of $6.90 to $7.10 per share, and that’s accounting for unfavorable foreign exchange and fuel price trends, well ahead of analysts’ prediction of $6.81 per share. The company is also expecting net yields to increase by 4% to 6% on a currency-adjusted basis in 2017, well up from its 3.9% climb last year.

Wall Street was already pretty bullish on Royal Caribbean ahead of its earnings release; Rachel Rothman at Susquehanna upped her price target on its stock from $95 to $99 yesterday.

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