- Analysts estimate adjusted EPS of -$3.76 vs. -$5.02 in Q4 FY 2020.
- The company's occupancy rate is expected to rebound YOY.
- Revenue is expected to rise dramatically as the cruise industry slowly recovers from the shock of the pandemic.
Royal Caribbean Cruises Ltd. (RCL) has been severely impacted by the COVID-19 pandemic, suffering an estimated $10.6 billion in net losses during the past two fiscal years. While Royal Caribbean's revenue has begun to rebound amid widespread vaccine rollouts, the spread of coronavirus variants has made it a bumpy recovery. Royal Caribbean announced in early January that it was pausing some cruise operations due to rising cases caused by the Omicron variant.
Investors will be looking closely at how quickly Royal Caribbean's earnings and revenue are recovering from their dismal levels in FY 2020 when the company reports earnings on Feb. 4, 2022 for Q4 FY 2021. Analysts expect the company to report its eighth straight adjusted loss per share as revenue rebounds from 2020's pandemic-depressed lows.
Investors will also be focused on Royal Caribbean's occupancy rate, a measure of the amount of available passenger capacity, or cabins, being utilized. The company's occupancy rate has fallen due to the pandemic, but is expected to rebound compared to the year-ago quarter. It will still be down sharply from levels prior to the pandemic.
Shares of Royal Caribbean have slightly underperformed the broader market over the past year. The stock has been extremely volatile over the last year, oscillating between extended periods of outperformance and underperformance at various points. Royal Caribbean's shares have provided a total return of 18.3% over the past year, below the S&P 500's total return of 19.9%.
Royal Caribbean Earnings History
Royal Caribbean reported Q3 FY 2021 earnings results that missed analysts' expectations. The company reported its seventh consecutive adjusted loss per share. Revenue, while significantly lower than analyst estimates, rebounded sharply both on a sequential basis and from the year-ago quarter in which the company reported negative revenue. The company said that two-thirds of its fleet was now back in operation. It also noted that the spread of the Delta variant of the coronavirus during the quarter caused some delay in the company's booking progress.
In Q2 FY 2021, Royal Caribbean reported financial results that missed consensus estimates. The company reported its sixth straight adjusted loss per share. Revenue sank 71.0% year over year (YOY), continuing its string of declines since the start of FY 2020. The company said that it was now operating 29 cruise ships, representing about 42% of capacity. It also forecasted that it would have 80% of its capacity back in service by the end of the year.
Analysts expect Royal Caribbean's financial performance to moderately improve in Q4 FY 2021. However, the company is still expected to report an adjusted loss per share, making it the eighth straight. Revenue is expected to increase nearly 34-fold, but that would still be less than half the revenue the company was generating before the pandemic. For full-year FY 2021, analysts expect the company to post a major adjusted loss per share for the second year in a row. Annual revenue is expected to fall 22.7%, which would be the second straight year of declining revenue.
|Royal Caribbean Key Stats|
|Estimate for Q4 FY 2021||Q4 FY 2020||Q4 FY 2019|
|Adjusted Earnings Per Share ($)||-3.76||-5.02||1.42|
Source: Visible Alpha
The Key Metric
As mentioned above, investors will also be focused on Royal Caribbean's occupancy rate, which the company refers to simply as "occupancy." It is calculated by dividing passenger cruise days by the available passenger capacity, as measured by available passenger cruise days (APCD). Passenger cruise days is a metric calculated by taking the number of passengers carried during the measurement period and multiplying that by the number of days of the passengers' respective cruises. The measure of capacity assumes double occupancy per cabin, which is why occupancy rates greater than 100% are possible—sometimes cabins are occupied by more than two passengers.
In each of the three years prior to the onset of the pandemic, Royal Caribbean consistently posted occupancy rates between 108-109%. In FY 2020, the first year impacted by the pandemic, the rate fell to 101.9%. But that seemingly high rate amid a pandemic, when much of the cruise industry ground to a halt, conceals a key fact: available passenger capacity, which is used to calculate the occupancy rate, was drastically reduced. The reduction was at least partly due to canceled cruise days, which are excluded from the measure of available passenger cruise days (APCD). In FY 2019, for example, APCD was approximately 41.4 million. Then, in FY 2020, the number fell to just 8.5 million. If Royal Caribbean's reported occupancy rate for FY 2020 were calculated by using FY 2019's higher APCD number, then the rate would be dramatically lower than officially reported.
In FY 2021, Royal Caribbean's occupancy rates have fallen dramatically relative to comparable three-month periods in previous years. The company posted occupancy rates of 37.7%, 27.5%, and 36.4%, in Q1, Q2, and Q3, respectively. Analysts expect the company's occupancy rate to rise to 63.3% in Q4 FY 2021, which would be the highest rate since the third quarter of FY 2020. For full-year FY 2021, analysts estimate Royal Caribbean's annual occupancy rate to be 52.1%, the lowest in at least five years.
Reuters. "Royal Caribbean pauses some cruise operations due to Omicron concerns." Accessed Feb. 3, 2022.
Royal Caribbean Cruises Ltd. "ROYAL CARIBBEAN GROUP TO HOLD CONFERENCE CALL ON BUSINESS UPDATE, FOURTH QUARTER AND FULL YEAR 2021 FINANCIAL RESULTS." Accessed Feb. 3, 2022.
Visible Alpha. "Financial Data." Accessed Feb. 2, 2022.
Royal Caribbean Cruises Ltd. "ROYAL CARIBBEAN GROUP REPORTS THIRD QUARTER 2021 RESULTS AND PROVIDES UPDATES ON ITS RETURN TO SERVICE." Accessed Feb. 3, 2022.
Royal Caribbean Cruises Ltd. "ROYAL CARIBBEAN GROUP REPORTS SECOND QUARTER 2021 RESULTS AND LATEST UPDATES ON RESUMPTION OF SERVICE." Accessed Feb. 3, 2022.
Royal Caribbean Cruises Ltd. "Form 10-K for the fiscal year ended December 31, 2020," Pages 53 & 54. Accessed Feb. 3, 2022.
Royal Caribbean Cruises Ltd. "Form 10-K for the fiscal year ended December 31, 2020," Page 53. Accessed Feb. 3, 2022.
Royal Caribbean Cruises Ltd. "Form 10-K for the fiscal year ended December 31, 2020," Page 15. Accessed Feb. 3, 2022.