Royal Caribbean Cruises Ltd. (RCL) stock dropped on Thursday, April 26, as sales lagged expectations, but Chairman and CEO Richard Fain is bullish on the year ahead.
"We are seeing strong demand for our product, our new ships are blowing everyone away, I'm extremely encouraged that only for this travel season, but the 2019 and beyond timeframe as well," Fain told TheStreet in an interview. "I'm not always able to understand day-to-day fluctuation in the stock market but we're pretty good at understanding the dynamics of the travel industry and those dynamics look very positive."
The Miami-based cruise ship operator reported net income of $218.7 million, or $1.02 per share. Adjusted earnings came in at $1.09 per share, which topped forecasts calling for 97 cents per share, according to FactSet. Revenue of $2.027 billion fell short of estimates of $2.045 billion. More specifically, passenger ticket revenues of $1.425 billion missed expectations of $1.445 billion.
Shares of Royal Caribbean fell 4.7% to $112.93.
For the second quarter, the company expects adjusted EPS to be in a range of $1.85 to $1.90 per share, below estimates of $1.96 per share, according to analysts surveyed by FactSet.
Still, Royal Caribbean raised its full-year adjusted earnings guidance by 15 cents to a range of $8.70 to $8.90 per share. Fain said the cruise ship operator is "getting higher prices and more people."
That being said, the prospect of rising oil prices could weigh on Royal Caribbean.
"It has already hurt us this year," said Fain. The combination of increased fuel prices and a strong dollar have hurt Royal Caribbean to the extent of 10 cents a year, Fain noted.
"[Oil prices] can be a factor, but I think part of what we saw in the strength in our announcement was that we absorbed that additional amount in our improved revenue picture and still raised our guidance," Fain said. "It's clearly a significant cost but we think what we can get from cruise revenue is even more important."
Royal Caribbean is working, however, to reduce energy consumption. As part of an agreement with the World Wildlife Fund, the cruise ship operator aims to reduce greenhouse gas emissions by 35% by 2020. As a result, the company has started using lower-energy equipment and non-incandescent light bulbs.
As far as material costs go, the Royal Caribbean CEO said steel tariffs are not an issue for the company even though steel is a "huge part of the construction of a ship," Fain said.
"Fortunately, all the ships we have on order are on essentially fixed-price contracts so that issue I'm happy to say is not our problem today, it's more a problem for the shipyards," Fain said. "None of us would like to see a trade war, not just because of the steel, but because a trade war is bad for economies everywhere."