Royal Caribbean Misses on Both Earnings and Revenue in Q3

The Miami-based global cruise vacation company Royal Caribbean reported worse-than-expected earnings and revenue in the third quarter as demand was hurt by rising rates of Covid-19.

The world’s second-largest cruise line operator reported an adjusted net loss of $4.91 per share, worse than the market expectations of $4.17.

The Miami, Florida-based reported revenue of $456.96 million in the third quarter ended Sept. 30, largely missing the Wall Street consensus estimates of $567 million. Revenue from passenger tickets was $280.2 million, compared with an estimate of $498.8 million.

Since the pandemic struck last March, the cruise industry has been in free fall. All of this is because people are afraid of catching COVID-19, which is hurting demand.

Analyst Comments

“We think the cruise industry will be one of the last travel sectors to recover from Covid-19. Cruising needs not just int’l travel to return, but ports to reopen, authorities to permit cruising, customer confidence to return, and ships to be physically relocated/ recrewed. We expect FY21 EBITDA losses > FY20, and for FY22 to be a transition year, with FY19 EBITDA not returning until FY23, and even then, EPS to be -50% given share issue dilution and interest expense,” noted Jamie Rollo, equity analyst at Morgan Stanley.

“We see debt rising into FY22 due to operating losses and high capex commitments. This leaves leverage high at 5x FY23e, so we see a risk more equity might need to be raised. Expensive on 15x recovery FY23e P/E vs 11x pre-COVID-19.”

Royal Caribbean Stock Price Forecast

Five analysts who offered stock ratings for Royal Caribbean in the last three months forecast the average price in 12 months of $96.25 with a high forecast of $111.00 and a low forecast of $80.00.

The average price target represents a 13.78% change from the last price of $84.59. From those five analysts, two rated “Buy”, three rated “Hold”, while none rate “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $60 with a high of $118 under a bull scenario and $25 under the worst-case scenario. The firm gave an “Underweight” rating on the cruise vacation company’s stock.

Several other analysts have also updated their stock outlook. Stifel raised the target price to $111 from $95. Truist Securities lifted the price target to $80 from $72. Deutsche Bank upped the target price to $83 from $80.

Check out FX Empire’s earnings calendar