By Brian Egger of BreakingCall.com
NEW YORK (TheStreet) -- Shares of Royal Caribbean (RCL) closed nearly 7% higher Thursday after the company's management gave a nod to next year's consensus earnings expectation.
Fresh off a third-quarter earnings beat, executives of the world's second-largest cruise line corporation also announced encouraging internal forecasts, calling for "overall yield improvement in the low-single digits for 2014."
To understand better why investors' spirits were buoyed by RCL's outlook, one must recall the cloudier forecast provided by industry leader Carnival (CCL) just one month earlier, when CCL announced its fiscal third-quarter results. CCL's earnings-related comments in late September had been sufficiently negative to send CCL shares 8% lower on the day of that announcement.
While CCL's management didn't provide a full-year forecast for next year, it did project that, during the first-half of 2014, "revenue yields will be down in a range similar to the back half of 2013." The upshot for investors: CCL could see its revenue yields fall 3% to 4% year-on-year during the first six months of 2014.
Why do RCL's ships seem to be heading for sunnier shores next year than those of CCL? Both companies are scheduled to increase their ship deployment -- as measured by the number of available berth days -- by about 2% in 2014. Industry-wide capacity growth should be moderate by historical standards and similar for both companies. So other factors appear to be at play.
First, Carnival has been working to "right its ship" and improve the sagging image of the Carnival Cruise Lines brand in the wake of vessel-related incidents. In February 2013, a fire on the Carnival Triumph resulted in a loss of propulsion on the ship that left passengers adrift for five days. Brand-building efforts are expected to set the stage for a return to yield growth in the second half of next year.