Royal Caribbean Surges After Raising Forecast

Quantum of the Seas arrives in Hong Kong in June 2015

By Nayan Das

July 31 (Reuters) – Royal Caribbean Cruises Ltd raised its full-year profit forecast as bookings surge in the Caribbean and the fast-growing Chinese market, sending its shares up 10 percent to a record high.

Royal Caribbean, which had cut its full-year forecast in April, said on Friday cruise bookings for the third and fourth quarters were higher than last year.

In contrast, larger rival Carnival Corp in June forecast disappointing earnings for the third quarter, as a strong dollar hurts revenue from Europe, where it has a large presence.

Royal Caribbean, the world’s second-largest cruise operator by revenue, is more focused in the Caribbean, which accounts for nearly half of its total capacity.

The company has also been focusing on markets outside the Caribbean, particularly on its Asian cruises, as demand in that region has been increasing steadily.

Royal Caribbean was seeing the fastest growth in the Asia Pacific region, particularly in China, where more than 95 percent of the cruises were booked for the year, Chief Financial Officer Jason Liberty said on a conference call.

Net yield, which includes ticket sales and onboard spending, rose 4.2 percent on a constant currency basis in the second quarter ended June 30.

Growth in net yield was driven by fewer discounts on last-minute bookings, the company said.

An improvement in pricing is expected to help the company in the next two quarters, Morningstar analyst Jaime Katz said.

Lower fuel costs also helped the company beat the average profit estimate for the second straight quarter.

Fuel costs accounted for 9.8 percent of total revenue in the second quarter ended June 30, down from 12.2 percent a year earlier.

Crude oil prices have slumped more than 40 percent since June last year, reducing fuel costs for cruise operators and airlines.

Royal Caribbean, which owns Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises, raised its profit forecast for the year to $4.65-$4.75 per share from $4.45-$4.65.

Analysts on average were expecting $4.61 per share, according to Thomson Reuters I/B/E/S.

Net income rose 34 percent to $185 million, or 84 cents per share, in the second quarter, beating the average analyst estimate of 73 cents.

Total revenue rose 4 percent to $2.06 billion, in line with estimates.

The company’s shares were up more than 8 percent at $89.58 in morning trade on the New York Stock Exchange. They hit a record high of $90.81 earlier in the session. (Additional reporting by Ramkumar Iyer in Bengaluru; Editing by Anil D’Silva)

(c) Copyright Thomson Reuters 2015.