Royal Caribbean Shares Surge on Cruise Demand


Royal Caribbean Cruises posted a better-than-expected 14 percent rise in quarterly profit Monday as stronger pricing and increased capacity helped it shrug off concerns about rising fuel prices and the slowing U.S. economy.

The strong earnings as well as an upbeat outlook for bookings for 2008 led to a more than 6 percent rise in Royal Caribbean shares.

The cruise industry, buoyed by recovering demand in the Caribbean market, has shown resilience to economic pressures, with its all-inclusive packages appealing to value-conscious vacationers.

Royal Caribbean, the world's second-largest cruise operator after Carnival , posted third-quarter net profit of $395 million, or $1.84 per share, compared with $345 million, or $1.63 per share, in the same quarter last year.

Revenue rose 19 percent to $1.95 billion as capacity rose 14 percent and net yields, a measure of average pricing, rose 4.1 percent.

Wall Street analysts, on average, had been expecting Royal Caribbean to post earnings of $1.78 per share on revenue of $1.89 billion, according to Reuters Estimates.

The U.S.-Norwegian company, which runs the Royal Caribbean and Celebrity cruise lines, said third-quarter earnings were boosted by a surge in bookings and stronger pricing toward the end of the quarter.

"It was a very encouraging finish for the quarter and augurs well for upcoming periods," said Chief Executive Richard Fain.

The company said it was getting a lift from the weak dollar, which is boosting bookings by Europeans, who have more buying power, as well as by Americans looking for alternatives to traditional European tours.

"We've definitely seen the benefit," Adam Goldstein, president of Royal Caribbean International, said on a conference call.

Stronger Bookings

For 2008, the company said that booking levels were higher than they were at the same time last year and that it is optimistic that demand will allow it to raise prices.

"Our advanced bookings provide evidence of our brands' ability to perform even during questionable economic periods," said Chief Financial Officer Brian Rice on a conference call.

The company also said that it had taken steps to reduce fuel consumption by installing new diesel engines and using drag-reducing paint. It said the savings were "nearly sufficient to offset the rise in fuel prices."

Royal Caribbean forecast fourth-quarter earnings of 32 cents to 37 cents per share, in line with Wall Street expectations.

After the strong third-quarter figures, Royal Caribbean raised the lower end of its forecast range for full-year 2007 profit.

The cruise company now expects to earn $2.80 to $2.85 per share. In July, the company had reduced its full-year earnings forecast to a range of $2.75 to $2.85 per share due to higher fuel prices and a charge related to a damaged ship.

Wall Street analysts, on average, had been expecting Royal Caribbean to post profit of 34 cents per share for the fourth quarter and $2.79 per share for the year, according to Reuters Estimates.