Royal Caribbean books 1Q loss but beats forecasts

NEW YORK — Royal Caribbean Cruises Ltd., battered by a sharp and prolonged drop in vacation spending, said Thursday it lost less in the first quarter than expected as bookings stabilized and cruise costs declined more than anticipated.

Travelers responding to aggressive discounts boosted bookings close to the date of departure, and the company plans to keep offering the deals. But onboard spending remains weak.

“Admittedly, we are providing our guests more value than we would like to these days, and pricing continues to be miserable,” said Chairman and Chief Executive Richard Fain during a conference call with investors. “But at least it seems to be at a miserable level that’s relatively stable.”

Falling fuel prices, the stronger dollar and internal cost-cutting all helped improve the results, Royal Caribbean said.

The company’s shares jumped $2.35, or 20.6 percent, to close at $13.76. The stock has traded between $5.40 and $33.78 during the past 52 weeks.

Analyst Robert LaFleur with Susquehanna Financial Group said travelers are more responsive to changes in price than had been thought.

“While 2009 is going to be a difficult year for (Royal Caribbean) it appears that cruise demand is proving to be more price-elastic than many investors anticipated,” said LaFleur, who has a “positive” rating on the stock.

Royal Caribbean lost $36.2 million, or 17 cents per share, compared with a profit of $75.6 million, or 35 cents per share, a year ago.

Revenue slipped 7 percent to $1.33 billion, from $1.43 billion in the first quarter of fiscal 2008.

Analysts surveyed by Thomson Reuters forecast a wider loss of 34 cents per share on revenue of $1.31 billion.

First-quarter net yields, which reflect revenue earned by the company without some variable costs, fell 13.5 percent during the quarter.

Despite the better-than-expected results, Royal Caribbean lowered its guidance for full-year net yields and earnings to reflect soft onboard revenue and other areas of weakness.

Royal Caribbean now expects net yields to fall between 12 percent and 13 percent for the year, compared with its previous guidance for a 9 percent to 13 percent drop.

The Miami-based company predicts earnings of roughly $1.35 per share for 2009, down from its previous forecast of $1.40 per share.

Analysts expect a full-year profit of 97 cents per share.

The company said bookings for the new Oasis of the Seas cruise ship — expected to launch in December — are “robust” and will boost yields late in the year.

But some analysts who expected Royal Caribbean to cut its forecast further said it may be too optimistic.

Goldman Sachs analyst Steven Kent, who has a “sell” rating on the stock, said Royal Caribbean’s outlook implies that net yield trends will improve significantly in the fourth quarter, which he said “seems unlikely.”

For the second quarter, Royal Caribbean expects to report results ranging from break-even to a loss of 5 cents per share on a net yield decline of about 17 percent.

Analysts expect a second-quarter loss of 1 cent per share.

“We are obviously not completely back to equilibrium yet, but the predictability of our bookings gets better every day and the risk of a dramatic deviation continues to fall,” said Chief Financial Officer Brian J. Rice in a statement.

Royal Caribbean said liquidity was $1.1 billion as of March 31, which reflects an improvement of about $100 million during the first quarter. The company also noted that it is “comfortable” that it will get the necessary financing for its Allure of the Seas ship, which is scheduled to launch in December 2010.

“Despite the upside surprise, we still have balance sheet concerns, which many not be a focus of the market now given the upside surprise, but could come to the forefront next year,” noted Barclays Capital analyst Felicia Hendrix.