Royal Caribbean Cruises On Forecast

MIAMI, Fla. ( TheStreet) -- Royal Caribbean Cruises ( RCL) swung to a profit in the second quarter, beating Wall Street's expectations by a dime, and raised its earnings outlook.

Investors responded with enthusiasm, bidding the cruise ship operator's stock up more than 10% Thursday after it raised its third-quarter and full-year guidance above consensus estimates. Rival Carnival ( CCL) rode the proverbial wave with shares up more than 7%, though it recently offered a gloomier forecast.

"Outperformance was almost all a function of cost control," noted Stifel Nicolaus analyst Steven Wieczynski. "RCL has now posted three straight quarters of impressive expense containment."

Net cruise costs fell 2.8% during the quarter. Excluding fuel-related expenses, net cruise costs dropped 4.4%. Those improvements reflected success in cost-cutting efforts, efficiencies that were achieved while the number of passengers carried during the quarter bumped up 18.4% to more than one million. Fuel expenditures were $6 million better than expected, the operator of Celebrity Cruises and Azamara Club Cruises said. Expense timing and currency fluctuations also helped keep costs in check.
Royal Carribean Stock Rating Report
(RCL) Rating and Financial Analysis

Royal Caribbean posted profits of $60.5 million, or 28 cents per share, in the quarter ended June 30, compared with losses of $35.1 million, or 16 cents per share, in the second quarter last year. Results bested Wall Street analysts' consensus call by 10 cents.

Quarterly revenues grew 18.5% to $1.6 billion, buoyed by capacity increases and yield improvements.

The company said demand was on track with earlier projections and continued focus on cost controls will drive future earnings. Management raised its profit outlook for the current quarter to a range of $1.52 to $1.57 per share, higher than the $1.51 average analyst estimate. Full-year earnings are expected to be in the range of $2.25 to $2.35 per share, easily beating analyst expectations for profits of $1.91 per share.

Industry rival Carnival, which operates the Princess and Costa brand cruises, said last month that volatile fuel costs and unfavorable exchange rates would cut into its third-quarter financials.

Carnival said it expects earnings between $1.43 and $1.47 per share while analysts hoped for profits of $1.52.

"We feel this is CCL management taking a conservative view, given the recent FX volatility," noted Wells Fargo analyst Tim Conder at the time.

Analysts have since revised their own expectations for Carnival, and now expect the firm to post third-quarter earnings of $1.46.

Carnival's second-quarter results also beat expectations, though profits per share fell by a penny year-over-year to 32 cents.

-- Reported by Miriam Marcus Reimer from New York.

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