Royal Caribbean estimates EPS impact from Cuba change

A Cuban flag flies from the mast of a Royal Caribbean ship on a past cruise to Havana. Under new Trump administration rules, passenger vessels can no longer sail to Cuba from the US A Cuban flag flies from the mast of a Royal Caribbean ship on a past cruise to Havana. Under new Trump administration rules, passenger vessels can no longer sail to Cuba from the US PHOTO: Anne Kalosh

Royal Caribbean Cruises Ltd. estimated impact of the Trump administration's new Cuba travel rules would reduce 2019 earnings per share in the range of 25 cents to 35 cents.

Only 3% of capacity, but very short notice

'While the affected sailings impact only 3% of our 2019 capacity, the extremely short notice period for this high-yielding destination amplifies the earnings impact,' EVP and CFO Jason Liberty said.

'The result of this policy change has created a short-term impact to our guests, operations and earnings; fortunately, we have many alternative and attractive destinations for our guests to choose from,' Liberty added.

Four ships impacted

Royal Caribbean International's Majesty of the Seas and Empress of the Seas and Azamara Club Cruises' Azamara Quest and Azamara Journey had itineraries touching Cuba.

In May, RCL had provided full-year EPS guidance in the range of $9.65 to $9.85.

Offset by 'plummeting fuel prices?'

Reacting to the new guidance, brokerage William Blair decided to keep its EPS estimate for RCL unchanged at $9.85. While the Cuba news presented a 'new wildcard,' analyst Sharon Zackfia said in a note, 'plummeting fuel prices' — bunker down 11% to 12% since the company last reported earnings — 'should essentially offset the penalty associated with Cuba.'

William Blair reiterated its 'outperform' (buy) rating for RCL and a $118.42 price target.

In early Thursday trading, RCL shares were down more than 1%, at about $117.

 

Posted 06 June 2019

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Anne Kalosh

Editor, Seatrade Cruise News & Senior Associate Editor Seatrade Cruise Review