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Royal Caribbean Reports Q4 2014 Earnings

Royal Caribbean Cruises Ltd. today reported 2014 results and provided increased guidance for 2015. Following its Double-Double trajectory, the company’s earnings for 2014 were up more than 40% over 2013 and are expected to be up a further 40% in 2015.


Full Year 2014:

  • Net Yields were up 2.4% on a Constant-Currency basis (up 1.4% As-Reported).
  • Net Cruise Costs (“NCC”) excluding fuel were down 0.6% on a Constant-Currency basis (down 0.8% As-Reported).
  • Adjusted Net Income was $755.7 million, or $3.39 per share, versus Adjusted Net Income of $539.2 million, or $2.44 per share, in 2013.
  • In the fourth quarter, the US Dollar strengthened significantly and the price of crude oil fell dramatically in world markets, but the price at-the-pump fell more slowly.  The net effect of both factors on the company was a reduction in EPS of $0.07 per share since October.
  • Operationally, results were on target, but close-in bookings were at the low end of the scale whereas 2013’s very robust pattern was unusually strong. These weaker bookings were offset by improved expenses and equity investments.
  • US GAAP Net Income was $764.1 million or $3.43 per share, versus $473.7 million, or $2.14 per share in 2013.

Full Year 2015 Outlook:

  • Net Yields are expected to increase 2.5% to 4.5% on a Constant-Currency basis (in the range of down 0.5% to up 1.5% As-Reported).
  • NCC excluding fuel are expected to be up 1% or better on a Constant-Currency basis (down 1.5% to 0.5% As-Reported).
  • Adjusted EPS for 2015 is expected to be in the range of $4.65 to $4.85 per share – slightly higher than previous guidance of $4.55. Approximately $0.05 of the improvement is due to the combined effect of lower fuel costs offset by negative foreign exchange movements. The remainder of the difference is due to improved operational elements.
  • In the second quarter of 2015, Royal Caribbean International will take delivery of Anthem of the Seas, the sister ship to the highly successful Quantum of the Seasthat made her debut in the fourth quarter of 2014. This spring, TUI Cruises, the company’s German joint venture, will take delivery of its second new build, Mein Schiff4.  Also this spring, the company will deliver Celebrity Century to its Chinese joint venture, SkySea Cruises.

“It’s been a good year and we are looking forward to another good one in 2015,” said Richard D. Fain, chairman and chief executive officer. “Our brands are performing at their strongest levels ever and our Double-Double program is solidly on track.”


Adjusted Net Income for the fourth quarter of 2014 was $70 million, or $0.32 per share, compared to Adjusted Net Income of $49.9 million, or $0.23 per share, in the fourth quarter of 2013.  US GAAP Net Income for the fourth quarter of 2014 was $109.8 million, or $0.49 per share.  Constant-Currency NCC excluding fuel were up 2.3%, better than the midpoint of guidance.  Net Yields on a Constant-Currency basis increased 2.7% versus guidance of 3.5%, driven by a weaker than anticipated Caribbean pricing environment.

The strengthening of the US Dollar, net of fuel, reduced EPS by $0.07.  Even though the worldwide price of crude oil dropped precipitously during the quarter, there is a lag between sharp movements in crude prices and the cost of fuel at-the-pump and bunker inventory on board our ships.  Bunker pricing net of hedging for the fourth quarter was$660 per metric ton and consumption was 347,000 metric tons.


Adjusted Net Income for the full year 2014 was $755.7 million, or $3.39 per share, compared to Adjusted Net Income of $539.2 million, or $2.44 per share, for the full year 2013.  This represents a 40% year-over-year increase in Adjusted Earnings.  US GAAP Net Income for the full year 2014 was $764.1 million, or $3.43 per share.  During the fourth quarter, tax reform in Spain eliminated limitations on the carry forward period for previously recognized net operating losses. This resulted in a net income benefit of$33.5 million, or $0.15 per share.  This benefit had not been anticipated in the company’s guidance and, in accordance with the company’s past approach to such items, was excluded from Adjusted EPS.

Net Yields for the full year 2014 increased 2.4% on a Constant-Currency basis. Onboard revenue yields were up 3.8%.

NCC excluding fuel were down 0.6% on a Constant-Currency basis, versus guidance of flat to slightly down.  The average bunker price net of hedging for full year 2014 was$693 per metric ton and consumption was 1,367,000 metric tons.

Towards the end of 2014, the US Dollar strengthened while the price of fuel in world markets declined, but at a more dramatic rate.  While the impact of currency is immediate, there is a lag before a change in the price of fuel flows through to the business.  There continues to be a relationship between foreign exchange and fuel, but the offsets are not exact (especially in the short term) and fluctuations a near certainty.  For 2014, the net impact of currency and fuel was a negative $0.07 to earnings relative to the latest guidance.

At the beginning of 2014, the company forecasted Adjusted Earnings of $3.20 to $3.40 per share.  In the first and second quarter, foreign exchange moved in the company’s favor and the company increased the midpoint of its guidance to $3.45, largely to reflect that improvement.  Later in the year, foreign exchange reversed direction, reversing the earlier benefit. The company’s final Adjusted EPS of $3.39 was at the top end of original guidance.  Interestingly, foreign exchange movements netted to approximately zero by year-end.