Casinos & Hotels

Is Royal Caribbean Finally Cruising Toward Recovery?

Royal Caribbean Group (NYSE: RCL) reported its most recent quarterly results before the opening bell on Monday. Like the rest of the cruise stocks, Royal Caribbean has been beaten up and nearly left for dead. However, there may be a light at the end of the tunnel as more people are being vaccinated for COVID-19.

The firm said that it had a net loss of $5.02 per share on $34.14 million in revenue, which compared with consensus estimates that called for a $5.20 per share net loss and revenue of $35.61 million. The same period of last year reportedly had EPS of $1.42 on $2.52 billion in revenue.

Management noted that the COVID-19 pandemic has been the most difficult in the company’s history. However, the firm remains confident about the ability to recover and return to a positive trajectory. Management also noted that it is encouraged to see the sharp decline in cases and the growing availability of vaccines.

As it stands now, the firm estimates its cash burn to be, on average, in the range of approximately $250 million to $290 million per month during a prolonged suspension of operations. This range includes all interest expenses, ongoing ship operating expenses, administrative expenses, hedging costs and expected necessary capital expenditures.

At the end of the quarter, Royal Caribbean had liquidity of approximately $4.4 billion, including $3.7 billion in cash and cash equivalents and a $0.7 billion commitment from a 364-day facility.

Looking ahead, the booking activity for the second half of 2021 is aligned with the company’s anticipated resumption of cruising. Pricing on these bookings is higher than in 2019. Note that the company has $1.8 billion in customer deposits, of which 50% are related to future cruise credits.

Royal Caribbean stock traded up about 9% to $86.10 on Monday, in a 52-week range of $19.25 to $101.00. The consensus price target is $70.08.