Royal Caribbean Soars on Outlook

MIAMI ( TheStreet) -- Royal Caribbean Cruises ( RCL) shares soared Tuesday morning after the cruise ship operator said cost controls and new ships will help drive record earnings next year.

Royal Caribbean shares spiked 13.7% less than two hours into the day's session to trade at $39.98 amid heavy volume. Nearly 9 million shares were in play, compared with their average daily trading volume of 2.4 million share.
Royal Caribbean

Royal Caribbean said 2010 earnings will grow to a range of $2.43 to $2.47 per share, up from its previously announced forecast for earnings between $2.25 and $2.35 per share. Net earnings in 2011 is expected to top its prior record of $3.26 per share, the company said.

"Profitability momentum moving into 2011 is also quite strong with our newest vessels performing exceptionally well and our management team controlling costs very effectively," said CEO Richard D. Fain. "The economy is still tough, but even facing such headwinds our outlook is remarkably encouraging."

Analysts from Barclays Capital issued an upgrade on Royal Caribbean shares to overweight, from equal weight, and raised their price target on the stock to $46, from $36. Barclays upgraded rival Carnival's ( CCL) as well, to overweight from equal weight, and raised their price target to $52 from $43.

In the recent quarter Royal Caribbean booked earnings of $356.8 million, or $1.64 per share, a 35.4% increase over year-earlier income of $230.4 million, or $1.07 per share.

Quarterly revenue jumped 16.7% to $2.1 billion, attributed to capacity increases and yield improvements. Net yields increased 5.2% in the quarter.

Royal Caribbean's earnings results topped analysts' consensus call for EPS of $1.57. Sales were in line with expectations.

Passenger bookings are also up, thanks in part to lower ticket prices enacted last year in an effort by Fain to draw potential customers who were willing to travel but at lower rates. Fain said demand is now "steady and solid."

Royal Caribbean's solid report and stellar forecast echoed that of Carnival's recent performance.

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Last month Carnival also cruised past earnings expectations with strong double-digit profit gains, and forecast stronger bookings and yields for the remainder of 2010 and into 2011.

>>Carnival Sails on Earnings Beat, Forecast

The operator of Carnival and Princess cruise ship lines said booking volumes for the remainder of 2010 and the first half 2011 are running ahead of the prior year at prices in line with prior year levels.

Carnival CEO Micky Arison expects "revenue yields to continue to improve in 2011 and beyond as the economy regains its footing."

Carnival raised its earnings guidance for the year to a range of $2.48 a share and $2.52 a share, up from its prior guidance for earnings of $2.25 to $2.35. The revised outlook tops analysts' consensus call for 2010 earnings of $2.36 per share.

Carnival shares were 6.1% higher ahead of midday Tuesday. The Vanguard Consumer Discretionary ( VCR) and iShares Dow Jones U.S. Consumer Services Sector Index Fund ( IYC), exchange-traded funds that count Royal Caribbean and Carnival among their holdings, both traded up as well, gaining 0.5% and 0.6%, respectively.

-- Written by Miriam Marcus Reimer in New York.

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