Royal Caribbean (RCL) Up 36.9% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Royal Caribbean (RCL). Shares have added about 36.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Royal Caribbean due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Royal Caribbean Q1 Earnings & Revenues Miss Estimates

Royal Caribbean reported first-quarter 2020 results, wherein both earnings and revenues missed the respective Zacks Consensus Estimate. The top line missed the consensus estimate for the third straight quarter. Moreover, both earnings and revenues declined sharply year over year due to the coronavirus pandemic.

The company reported adjusted loss per share of $1.48, wider than the Zacks Consensus Estimate of a loss of 81 cents. In the prior-year quarter, the company had reported adjusted earnings per share of $1.31 per share.

Total revenues were $2,032.8 million, missing the consensus mark of $2,103 million and declined 16.7% from the year-ago quarter. Due to the pandemic, the company suspended its global cruise operation beginning Mar 13, 2020. This resulted in cancellation of 130 sailings during the first quarter.

During the suspension of its operations, the company anticipates cash burn in the range of nearly $250 million to $275 million per month.

Quarterly Highlights

Passenger ticket revenues decreased 19.5% to $1,376.9 million, and onboard and other revenues declined 10.4% to $655.9 million.

Total cruise operating expenses of $1,413.7 million improved 15% on a year-over-year basis.

Other Financial Information

As of Apr 30, 2020, the company had cash and cash equivalents of approximately $2.3 billion. On May 19, 2020, the company completed its $3.3 billion senior secured notes offering.

The company announced that as of May 19, 2020, the anticipated debt maturities for the remainder of 2020 and 2021 are $0.4 billion and $0.9 billion, respectively.

Guidance

Due to the pandemic, the company has withdrawn guidance. The company is unable to estimate the financial losses due to the coronavirus as the magnitude and duration of the same remains uncertain.

The company announced interest expenses for the remainder of the year (Apr 1, 2020 through Dec 31, 2020) in the range of $590 million to $610 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -51.96% due to these changes.

VGM Scores

Currently, Royal Caribbean has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Royal Caribbean has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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