UPDATE:Royal Caribbean Swings To 2Q Profit;Sees Travel-Recovery Signs

22nd Jul 2010 17:05

(Updates lede, adds additional detail throughout; updates share price.) By Veronica Dagher and Tess Stynes Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Royal Caribbean Cruises Ltd. (RCL) recovered from a prior-year loss in the second quarter as the cruise operator trimmed costs and continued to see more signs of a travel and tourism recovery. The result exceeded estimates and shares were recently up 8.5% at $26.69. The stock through Wednesday's close was up 62% the past 52 weeks. Royal Caribbean's results also helped lift shares of competitor Carnival Corp.(CCL). Carnival was up 6.6% to $33.51 in recent trading. Royal Caribbean also raised its 2010 earnings guidance by a dime, mostly owing to cost-control efforts, and reaffirmed its growth target for revenue per available room. Royal Caribbean expects third-quarter earnings of $1.52 to $1.57 a share and net yield growth of about 7%. Analysts projected earnings of $1.51, according to Thomson Reuters. Chief Executive Richard D. Fain said Royal Caribbean's profitability continues to improve and the "booking environment continues to be remarkably stable" despite continuing economic uncertainty. Booking lead times also expanded, which is a positive sign for the company. When consumers make their reservations further in advance, cruise lines are better able to predict their revenue. In general, consumers tend to book their vacations further out when they feel more secure about their future financial condition. Beginning around the fall of 2008, Royal Caribbean and several of its competitors saw their booking windows contract as consumers became more cautious. And while some consumers remain wary, others continue to spend, especially during their vacations. Though a relatively small part of Royal Caribbean's overall revenue, onboard spending-a gauge of how consumers feel about their immediate financial condition-rose slightly in the quarter. In addition, Royal Caribbean Chief Financial Officer Brian Rice said despite European debt concerns, the company's European-sourced business has also shown "remarkable" resilience. Still, the company said it's not seeing any signs of a near term recovery in Spain which in turn pressures it Pullmantur brand. Royal Caribbean reported a profit of $60.5 million, or 28 cents a share, compared with a prior-year loss of $35.1 million, or 16 cents a share. The prior year included 5 cents in costs related to the H1N1 virus and about 11 cents a share because of currency adjustments and hedging impacts. The company in April projected earnings of 16 cents to 21 cents, above analysts estimates at the time. For the company, whose ships include its namesake brand and Celebrity Cruises, revenue climbed to $1.6 billion from $1.3 billion. Analysts polled by Thomson Reuters recently expected $1.62 billion. Net yields excluding currency impacts, an important measure of profitability for cruise lines, rose a slightly less than expected 5.4%, compared with a prior-year drop of 14%. Net cruise costs declined 2.8%, but excluding fuel costs fell 4.4%. Royal Caribbean reiterated its commitment to cost control and said it is "mindfully watching each and every penny." Fain expects the company's future results to be bolstered more by fatter margins rather than just top-line growth through adding more ships. And while he still expects new capacity growth to be less than in the past, the company continues to talk to shipyards. Euro weakness and a lack of demand has caused several shipyards to aggressively pursue new business with several cruise lines. -By Veronica Dagher and Tess Stynes, Dow Jones Newswires; 212-416-2261; [email protected] (END) Dow Jones Newswires July 22, 2010 12:05 ET (16:05 GMT)