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Royal Caribbean (RCL) Down 2.2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Royal Caribbean (RCL - Free Report) . Shares have lost about 2.2% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Royal Caribbean due for a breakout? 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 Q1 Earnings & Revenue Beat Estimates

Royal Caribbean reported impressive first-quarter 2019 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Notably, both the top and bottom line outpaced the consensus mark for the second straight quarter. Following the quarterly results, shares of the company gained nearly 4% in the pre-market trading session.

Adjusted earnings of $1.31 per share surpassed the Zacks Consensus Estimate of $1.11 and also increased 20.2% year over year owing to higher revenues.

Total revenues came in at $2,439.8 million outpacing the consensus mark of $2,375 million and increased 20.3% from the year-ago quarter number. This upside can be attributed to higher passenger ticket as well as onboard and other revenues.

Quarterly Highlights

Passenger ticket revenues jumped 19.9% to $1,709.98 million, and onboard and other revenues increased 21.2% to $729.8 million.

On a constant-currency basis, net yields rose 9.3% year over year. This improvement was driven by solid demand for core products as well as onboard experiential products and activities.

Net cruise costs (NCC), excluding fuel per APCD, rose 9.6% on a constant-currency basis, lower than management’s expectation of 10% increase.

Total cruise operating expenses of $1,413.7 million improved 20.2% on a year-over-year basis. The company witnessed rise in operating expenses at the Payroll and related, Onboard and other, Commissions, transportation and other, and other operating segments. Fuel expenses also increased during the quarter under review.

2Q19 Guidance

For the second quarter of 2019, Royal Caribbean expects adjusted earnings per share in the $2.45-$2.50 range. The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.47.

Constant-currency net yields are projected to increase by 9.5%. NCC, excluding fuel, is likely to improve 10% on a constant-currency basis.

Full-year View

For 2019, Royal Caribbean projects earnings of $9.65-$9.85 per share compared with $9.75-$10 anticipated earlier. Markedly, the company’s guidance includes 25 cents negative impact from the incident in the Grand Bahama Shipyard. Also, currency headwinds and fuel price hurt the projection to the tune of nearly 25 cents. The Zacks Consensus Estimate for current-year earnings stands at $9.92. The company expects net yields between 7.5% and 9% on a constant-currency basis.

NCC, excluding fuel, is expected to be up 10% on a constant-currency basis.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Royal Caribbean has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Royal Caribbean has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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