RCL Stock Plunges 8% on bad Earnings Report

Investors torpedoed Royal Caribbean's (RCL) shares on Monday, sending them plunging 8% for the day following a second consecutive weak earnings forecast for 2015.

The cruise-line operator, which on Monday christened its newest ship, the 168,667-ton Anthem of the Seas on Monday, reported earnings of 20 cents a share. Analysts were expecting 14 cents a share, with the outperformance largely attributed to improved pricing conditions in the key Caribbean cruise market amid reduced industry capacity. Strong demand for cruises in the emerging China market was also seen.

Unless you a short term oriented shareholder - who cares?

BTW investors do not torpedo stocks. Some days there are more shares for sale than are demanded to be bought. Greater supply vs. demand = a decrease in price. It's economics and investing 101.

Sounds like more cost cutting coming.

J.

But ships have been known to torpedo ships. Could have been RCL Stock Submerged by Earnings Report.

You have to read the entire release. Strong dollar and rising fuel costs affect the outlook for the rest of 2015 beyond the strong 1st quarter. CCL has signaled it will try to hold the line on promotions/pricing and sale with empty cabins. Royal Caribbean may follow. Fares have already risen since the 1st quarter, drink packages are up, and gratuities are up. Seems like rising prices and a rising dollar will hurt international demand more. At some point, alternative vacation/cruise options become more attractive. Time will tell.

Investors torpedoed Royal Caribbean's (RCL) shares on Monday, sending them plunging 8% for the day following a second consecutive weak earnings forecast for 2015.

 

The cruise-line operator, which on Monday christened its newest ship, the 168,667-ton Anthem of the Seas on Monday, reported earnings of 20 cents a share. Analysts were expecting 14 cents a share, with the outperformance largely attributed to improved pricing conditions in the key Caribbean cruise market amid reduced industry capacity. Strong demand for cruises in the emerging China market was also seen.

Good time to buy...:D

You have to read the entire release. Strong dollar and rising fuel costs affect the outlook for the rest of 2015 beyond the strong 1st quarter. CCL has signaled it will try to hold the line on promotions/pricing and sale with empty cabins. Royal Caribbean may follow. Fares have already risen since the 1st quarter, drink packages are up, and gratuities are up. Seems like rising prices and a rising dollar will hurt international demand more. At some point, alternative vacation/cruise options become more attractive. Time will tell.

There is no financial logic to sailing with empty cabins as long as they can charge what the cabin costs. It won't happen.....

You have to read the entire release. Strong dollar and rising fuel costs affect the outlook for the rest of 2015 beyond the strong 1st quarter. CCL has signaled it will try to hold the line on promotions/pricing and sale with empty cabins. Royal Caribbean may follow. Fares have already risen since the 1st quarter, drink packages are up, and gratuities are up. Seems like rising prices and a rising dollar will hurt international demand more. At some point, alternative vacation/cruise options become more attractive. Time will tell.

Actually is was Royal Caribbean (Fain) that said that they were going to hold the line on late discounting, not CCL.

"In a policy shift aimed at protecting its pricing integrity, Royal Caribbean Cruises Ltd. is halting last-minute discounting, chairman and ceo Richard Fain said Monday.

This relates to the sharp price cuts 10, 20 or 30 days before sailing that are typically used to top up occupancy. The only exception will be on very short cruises, of two to four nights, when the consumer purchase decision is typically made closer to departure."

Interesting that they talk about rising fuel cost being an impact, but they mention it only in terms compared to their estimate for the quarter. If you look at it year over year compared to Q1 last year their fuel costs are down 39 million.

Interesting looking at the actual numbers, instead of the text you find

Ticket Revenue down 42 Million

On Board Revenue down 31 Million

Now while the strong dollar would impact the revenue numbers on bookings sold in other currencies, it would not impact the majority of the business sold in US dollars. Also the strong dollar would provide substantial benefits on the expense side.

Onboard and Other expenses down 7 million

Food expenses up 2 million

Fuel down 39 million

Other Operating costs down 36 million

Total Expenses down 81 million

Resulting in Operating income up 8 million

and Net revenue up 19 million.

Will be interesting to compare with CCL numbers which would be even more impacted by the strong dollar (larger presence overseas, including more operations that utilize other currencies for bookings, including onboard revenue).

I would consider the fuel costs statements and to some degree the strong dollar comments to be more of a smoke screen that they are using for cover for their results.

Just took a look at the CCL 10 Q .

Looking at the same numbers for them you get (note that CCL is a larger company so the scale is a bit different)

Ticket Revenue down 95 million Dropped like RCL

On board Revenue up 39 million Increased compared to RCL Drop

Expenses

Commissions, transportation and Other Down 34 Million

Payroll Down 14 Million

Fuel Down 205 Million

Food Down 6 Million

Total Operating income up 199 million

Net Revenue up 69 million

CCL indicated a profit of .20 per share with the currency impact being .06 per share.

So both lines showed considerable reductions in expenses compared to last year, especially in Fuel. Both indicated reduction in expenses due to currency. CCL had reductions in food and payroll which RCL did not. That might be due to the CCL's greater overseas operations with major units located in Australia and the UK (P&O, Princess Australia, etc.)

Both had reductions in ticket revenue. RCL also had had a drop in onboard sales compared to CCL showing an increase there.

Will be interesting when RCL's 10Q gets listed on Edgar. It will have more detail then the press release for a head to head comparison.

Actually is was Royal Caribbean (Fain) that said that they were going to hold the line on late discounting, not CCL.

 

"In a policy shift aimed at protecting its pricing integrity, Royal Caribbean Cruises Ltd. is halting last-minute discounting, chairman and ceo Richard Fain said Monday.

 

This relates to the sharp price cuts 10, 20 or 30 days before sailing that are typically used to top up occupancy. The only exception will be on very short cruises, of two to four nights, when the consumer purchase decision is typically made closer to departure."

 

Not sure what pricing integrity he thinks he's protecting. 1-2-3 has been a very expensive program. Yes, prices went up a bit to cover the cost, but although I don't know how they handle the accounting, it is clearly a driver of reduced on-board revenue.

Ships have to be staffed to handle 100% occupancy and I doubt their supply chain is flexible enough to reduce supplies to a cruise based on a specific cruise's occupancy. An empty cabin is a lost opportunity to help pay for the essentially "fixed costs" and it's a lost opportunity for increased on-board revenue.

There is no advantage to celebrity/RCL to get reservations in advance vs at the last minute...revenue is booked when a cruise occurs, not when it's booked. Are that many waiting until after final payment to book their cruises at a lower cost...at last minute pricing? Sure, there are a few, but most have to plan air travel and that can be a show stopper for booking last minute cruises....certainly for anyone trying to book air using air miles of some sort.

The travel/cruise decision is one made on total cost, not just cruise cost but includes airfares. The airlines have taken more and more of individual travel budgets...and it's pretty much a zero sum game. If air goes up, then cruise fare can't go up...etc. That's probably hurting the cruise industry more than any other factor...and that's out of Fain's hands.

So I think (perhaps hope) Fain's statement is smoke....perhaps it is a wishful hope on his part. Trying to hold a premium price over princess/holland america and others...at the same time as you're cutting expenses, reducing staff, reducing food quality (subjective) is not so easy, if it can be done at all. Certainly there are some red flags reading Cruise Critic that say all is not going swimmingly well in customer loyalty/satisfaction.

I guess we'll all see how this plays out. My guess is little will actually change...we will wait for "special offers" like 1-2-3 and, even the "loyal", will look closer at competitive cruises or non-cruise vacations as prices creep up. My bet...we'll continue to see attractive prices on cruises that have vacant cabins, if you can get to/from the embarkation point at a reasonable price.

Finally, it would be much more informative if we could see the numbers by cruise line. It's quite possible and perhaps likely that RCL and Celebrity are doing OK and it's the European/Asian based companies are the problem areas.

There is no financial logic to sailing with empty cabins as long as they can charge what the cabin costs. It won't happen.....

Agreed! And, I've never seen it happen on an RCCL ship. But, it's certainly not the first time that Corporate has threatened to do this. :rolleyes:

Well I guess hiking drink prices, doing an endless BOGOHO sale on RCL, and various cuts hasn't brought in the bacon like they thought. :confused:

Finally, it would be much more informative if we could see the numbers by cruise line. It's quite possible and perhaps likely that RCL and Celebrity are doing OK and it's the European/Asian based companies are the problem areas.

Asian based companies?

The entire Market has retreated to the level it began 2015 at, and is flat.

The press releases read the same for hundreds of Co's. The sky is not falling.

It's all about supply and demand and it's their own fault for creating so much supply with these mega ships that hold 4,600+ people. Not just RCL, the entire industry. Did they really think cruising was going to grow that much that the would be able to routinely sell out all these ships?

So does this mean the end of Tuesday (Happy Hour) Sales?

It's all about supply and demand and it's their own fault for creating so much supply with these mega ships that hold 4,600+ people. Not just RCL, the entire industry. Did they really think cruising was going to grow that much that the would be able to routinely sell out all these ships?

 

So does this mean the end of Tuesday (Happy Hour) Sales?

I seem to recall a month or so ago when Celebrity (or maybe it was the TA's) claimed that 1-2-3 was ending forever. I think it took less than a month for it to return for 2015 European cruises.

Don't believe everything you read/hear.....Tuesday specials may be renamed or moved to Wednesday, but discounting is part of the fabric of cruising....and it's not going to disappear. An empty cabin guarantees you make no money...filling it at cost at least gives the opportunity to make on board spend money, raises occupancy (good for financials), attracts customers who may return paying profitable rates...it's just all pluses. As long as cabins are offered after final payment, when one can't reduce the price they pay...you can only adjust your cabin by upgrading (paying more $'s...another plus) it's a win/win.

As I said...we'll see. I think sailing with empty cabins and higher prices is just a management wish ....but I've been wrong many times in the past.

doing an endless BOGOHO sale on RCL,

Wish Celebrity would adopt that and give up this 1-2-3 business. We routinely book inside cabins and usually never book until after final payment on Celebrity.

On RCL it's the opposite, we booked out last 2 cruises way in advance using the BOGOHO sale and are paying approximately $97 per person per day for one of their Promenade Inside Staterooms.

A tale of two totally different sales models. Here RCL has had our money since last year sometime and the cruise is not until October 2015. As for Celebrity we are still waiting to book our May (yes, next month) Bermuda cruise on Summit.

You have to read the entire release. Strong dollar and rising fuel costs affect the outlook for the rest of 2015 beyond the strong 1st quarter. CCL has signaled it will try to hold the line on promotions/pricing and sale with empty cabins. Royal Caribbean may follow. Fares have already risen since the 1st quarter, drink packages are up, and gratuities are up. Seems like rising prices and a rising dollar will hurt international demand more. At some point, alternative vacation/cruise options become more attractive. Time will tell.

I think Royal Caribbean has already announced that there will be no more last minute discounts in an effort to shore up its pricing.

I think Royal Caribbean has already announced that there will be no more last minute discounts in an effort to shore up its pricing.

Not surprising, since it's the same company (RCCL) -- Fain's the big boss. He comes out with "tough talk" -- for the shareholders' benefit -- whenever the stock takes a significant hit. But, that man has been around for a LONG time. He knows (probably better than anyone) that ships can't sail with empty cabins!

Wish Celebrity would adopt that and give up this 1-2-3 business. We routinely book inside cabins and usually never book until after final payment on Celebrity.

 

On RCL it's the opposite, we booked out last 2 cruises way in advance using the BOGOHO sale and are paying approximately $97 per person per day for one of their Promenade Inside Staterooms.

 

A tale of two totally different sales models. Here RCL has had our money since last year sometime and the cruise is not until October 2015. As for Celebrity we are still waiting to book our May (yes, next month) Bermuda cruise on Summit.

Oh I hope not! After a month or so the BOGOHO sale converted prices to what they were before the sale. You'll see that $600 Celebrity cabin turn to $800, but on sale for $600! My promenade cabins last year (no promo) and 2017 (BOGOHO) are both $75 a night. At least with the 123GO, one would use the free tips to bring an OV closer to inside cabin prices.

I agree though about these big ships, why on earth we need 4 Oasis ships is beyond me... The port limitations alone are going to over saturate the market.

At least with the 123GO, one would use the free tips to bring an OV closer to inside cabin prices.

I have not had that experience with Celebrity pricing out my cruises. An inside after final payment is much cheaper than and OV with perks.

What Fain is talking about is similar to the "moral hazard" argument at the time of the bank bailouts. Consumer have gotten used to the super-sale prices and now think that is the true cost of a cruise. This is designed to reset expectations. Yes, RCL will suffer short-term revenue loss from empty cabins. But they expect greater long-term revenue gain from breaking the habit of waiting for a super-sale. Many companies find themselves in this same bind after years low prices during the weak economy, and many will similarly try to break out. When handled correctly, it works and you re-educate your consumers about cost. When it doesn't work, you look like JC Penney.

Hey the shareholder obc we've had time and time again is still the best return we've had on an investment for a long time, even with this drop

 

A tale of two totally different sales models. Here RCL has had our money since last year sometime and the cruise is not until October 2015. As for Celebrity we are still waiting to book our May (yes, next month) Bermuda cruise on Summit.

if you're looking for Bermuda in May, jump on one of these:

5/1 $249 pp inside

5/24 $499 pp inside

5/31 $529 pp inside

Those fares notwithstanding, in general the Tuesday specials are more indicative of what a normal fare used to be, particularly in Europe, & even next fall's Caribbean. My thinking is that over time, people will think that the Tuesday specials prices at what were formally normal prices are a bargain compared to then normal fares.

In March we booked 11 nights on Equinox sailing November for just over $3300 TOTAL for a C3 Gty. which includes a drink package, gratuities, & $300 OBC. A C3 stateroom is now going for $2849 PER PERSON, including ONE of those perks

if you're looking for Bermuda in May, jump on one of these:

5/1 $249 pp inside

5/24 $499 pp inside

5/31 $529 pp inside

You what's really funny we wanted to do the 5/17 Summit Bermuda cruise and it's the only one that is not on Happy Hour. It hasn't been on the past 2 weeks while all the others have. Celebrity must be monitoring my computer. :rolleyes: