NEW YORK (TheStreet) -- Royal Caribbean (RCL) - Get Report reports second-quarter fiscal 2015 results on Friday. The strong U.S. dollar is sinking earnings, but the addition of new ships in highly profitable markets should keep the shares afloat.
Expectations are fairly low for the world's second-largest cruise ship operator. First-quarter net revenue yield dropped 5.4%, mostly due to the effects of the strong dollar. The first quarter is usually the weakest for the industry, so investors are looking for a pickup in revenue to keep the stock moving higher. Revenue was down 3.8% to $1.85 billion.
But things start to get interesting after the second quarter. The consensus estimate is for revenue of $2.06 billion and earnings per share of 74 cents. If the company hits that estimate, it would be a sequential quarter-over-quarter increase of 13.6%. By the third quarter, the cruising season will be in full swing, and revenue is expected to be up 24.6% sequentially and up 8.6% year over year. Business is expected to get better in the fourth quarter too. Analysts think fourth quarter revenue will be up 8.6%.
The back-half pickup leads perfectly into next year. Investors are expecting new ships in the highly profitable Asian markets to come online. Last month, Royal Caribbean completed the exterior construction of its newest Oasis class ship, Harmony of the Seas. The ship is scheduled for its maiden voyage in April. the largest cruise ship in the world, it will carry 5,479 passengers at double occupancy and feature 2,747 staterooms.
Anthem of the Seas launched in April and will sail from Southampton, U.K. Initially the ship will offer European and Mediterranean itineraries. Next year, Anthem of Seas will be based in Bayonne, N.J. The ship carries 4,180 passengers.
In May 2015, Royal Caribbean ordered four new Quantum class ships that will be ready by 2019. Quantum of the Seas just repositioned itself to sail throughout the Asian market. Beginning in late June 2015, the ship will sail three- to eight-night itineraries year-round from Shanghai to Japan and South Korea.
Investors believe the company can reduce debt while replacing less efficient ships with larger, more efficient ships. And Royal Caribbean management unveiled a program called "Double-Double" in an effort to double 2014 earnings per share by 2017.
With all the new ships sailing, analysts estimate the company will earn $5.84 in 2016. I think the stock can cruise to the mid $80s as investors begin to focus on the back half of 2015 and the beginning of 2016.
This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.