Royal Caribbean pushes back timing of being cash flow positive by a few months, but CEO believes 'we are past COVID'

MW Royal Caribbean pushes back timing of being cash flow positive by a few months, but CEO believes 'we are past COVID'

By Tomi Kilgore

Cruise operator stock falls after results missed expectations again the outlook for a profitable 2022 is in question, but CEO Jason Liberty no longer expects COVID to have an overall impact on its business

Shares of Royal Caribbean Group dropped Friday, after the cruise operator reported quarterly results that missed analyst expectations, again, and pushed back by a few months when it expects to stop its cash drain.

The company also put into question its previous projection to be profitable for the year in 2022, and said business was still too unpredictable to provide long-term financial targets, as some bullish analysts had been expecting.

On the bright side, Chief Executive Jason Liberty said on the post-earnings conference call with analysts that the company was "past COVID."

The stock $(RCL)$ dropped 4.2% in midday trading, to turn negative year to date. The stock has tumbled 14.5% over the past three months, but has gained 7.2% over the past 12 months. In comparison, the S&P 500 index has slipped 4.3% the past three months but climbed 15.7% the past year.

The company reported before the open a net fourth-quarter loss that narrowed to $1.36 billion, or $5.33 a share, from $1.37 billion, or $6.09 a share, in the same period a year ago. Excluding nonrecurring items, the adjusted loss per share narrowed to $4.78 from $5.02, but was wider than the FactSet loss consensus of $3.92.

Revenue rose to $982.2 million from $34.1 million, but was below the FactSet consensus of $1.04 billion.

That marked the third-straight quarter of wider-than-expected losses and the sixth-straight quarter of revenue misses.

Total cruise operating expenses grew 328% to $1.14 billion, including a 225% rise in payroll and related expenses to $307.8 million and a 280% increase in fuel expenses to $166.3 million.

By the end of 2021, the company returned more than 85% of its cruising capacity to operations, and despite the omicron impact, it expects to operate about 95% of its planned capacity in the first quarter.

The company said it expects to be operating cash flow positive "in late spring." In the company's third-quarter release in late-October, the company said it expected to be cash flow positive "by spring."

The change in outlook comes after the omicron variant created "short-term operational challenges," such as cruise cancellation and service disruptions.

The company also said in October that it expected to be profitable for the full year 2022. On Friday, the company the profitability guidance in question, as it said it expects a net loss for the first half of 2022 "and a return to profitability in the second half of 2022."

"While the timing of omicron was particularly unfortunate for the first half of 2022 and likely will delay our return to profitability by a few months, we do not expect it to impact our overall recovery trajectory and the strong demand for cruising," CEO Liberty said.

When analyst Steve Wieczynski at Stifel Nicolaus, who rates Royal Caribbean's stock a buy, asked on the post-earnings conference call with analysts if the company was still contemplating its long-term prospects, Liberty said:

"[I] think we're going to wait until we're in a little bit more of a predictable state, and our quarters are predictable, before providing that guidance."

He said, however, that he believed that, as the omicron variant has already begun fading, that the pandemic would likely no longer be a big weight on the business.

"We are certainly looking past COVID," Liberty said. "We believe we are past COVID...in terms of the overall impact on our business, and we're focused on our healthy return to service."

For 2022, the company said load factors for sailings for the first half of the year are expected to remain below historical levels, given the lingering impact from omicron. But for the second half, load factors continue to be booked in line with historical levels, and at higher prices, both with and without future cruise credits (FCCs).

-Tomi Kilgore

$(END)$ Dow Jones Newswires

February 04, 2022 13:09 ET (18:09 GMT)

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