Royal Caribbean CFO: Here's How We Trounced Wall Street's Profit Forecasts
It seems to be smooth sailing ahead for Royal Caribbean Cruises Ltd. (RCL) - Get Report .
Before the market open on Tuesday, Aug. 1, the company reported second-quarter earnings of $1.71 a share on revenue of $2.2 billion, much higher than Wall Street's estimates for earnings of $1.06 a share on revenue of $2.19 billion.
Royal Caribbean also raised its 2017 full-year outlook, now expecting earnings in the range of $7.35 to $7.45 a share, compared to its previous guidance of earnings of $7 to $7.20 a share, and said it was one of a few non-commodity sector firms to obtain a credit rating upgrade this year - a goal set by company CFO Jason Liberty three years ago.
Shares of Royal Caribbean rose 3.84% to $117.41 in afternoon trading.
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"It feels pretty great," Liberty said in an interview with TheStreet on Tuesday. "It's rewarding to see all of these things come together at once."
On an earnings call with analysts this morning, Liberty said new bookings were up by double digits for the past three months, partially helped by declining consumer fear about traveling abroad, regarding terrorism and geopolitical concerns.
Liberty noted on the call, too, that Royal Caribbean saw a "strong trend in beverage."
"Consumers are definitely more interested, or becoming more interested, in having an all-inclusive beverage package versus having to walk up every time and pay separately for a beer, or a glass of wine or whatever it might be," Liberty said. "Typically people's eyes are bigger than they're actually able to consume and that's a good thing for us."
Royal Caribbean has been expanding its "short product," long-weekend trips compared to weeks-long excursions, to boost millennial interest, according to Liberty, who said the company has seen its bookings from the generational group grow by one-third.
Liberty said there is also a growing consumer interest in traveling to Cuba, as cruises, "floating hotels," are easier than land excursions to the island which, until recently, was cut off from the U.S. for more than 50 years. Royal Caribbean recently announced its second cruise to sail to Cuba, Majesty of the Seas, which will debut in March 2019.
"There's always new destinations, new areas of interest, new governments that are willing to put ports into their main locations," Liberty said.
Due to intensifying U.S. tension with North Korea, travel to South Korea has been restricted, putting pressure on the Chinese market, causing "some problems." But, the Mediterranean and the Caribbean are two markets where demand remains high, Liberty said.
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