Royal Caribbean's Reduced Guidance Causes Argus Analysts To Jump Ship

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Royal Caribbean Cruises Ltd RCL has reduced its 2016 EPS guidance by $0.20 at the midpoint. FX headwinds, macroeconomic pressures and rising fuel costs could impact the company’s performance in the coming quarters, Argus’s John Staszak said in a report. He downgraded the rating on Royal Caribbean from Buy to Hold.

Royal Caribbean had reported its Q2 EPS at $1.09, representing almost 30 percent growth and beating the consensus estimate of $1.02. The upside was driven marginally higher net yields and lower fuel costs. Revenue came in at $2.1 billion, representing 2.3 percent y/y growth, but missing the consensus estimate of $53 million.

Expectations Reduced

Royal Caribbean lowered its 2016 EPS guidance from $6.15-$6.35 to $6.00-$6.10, versus the consensus estimate of $6.21. “The reduced guidance assumes higher fuel costs and foreign exchange headwinds, offset in part by the better-than-expected 2Q earnings,” analyst Staszak wrote.

Management estimated that the pound depreciation, following the Brexit vote, would adversely impact 2016 EPS by $0.14. Management also raised its constant-dollar net yields projection from an increase of 2.5-4.0 percent to 4.0-4.5 percent, reflecting the deconsolidation of the Pullmantur Group. Moreover, the company expects net cruise costs, excluding fuel and special items, to be up 1 percent.

Staszak reduced its EPS estimates for 2016 and 2017 from $6.40 to $6.15 and from $7.40 to $7.10, respectively.

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Posted In: Analyst ColorDowngradesAnalyst RatingsArgusJohn Staszak
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