Royal Caribbean Tumbles as Profit Forecasts Miss Estimatesby
Currency to have negative 14-cent impact on 2016 EPS
Shares slide in biggest intraday decline since July 2009
Royal Caribbean Cruises Ltd. slid the most in seven years after forecasting 2016 profit that missed analysts’ estimates partly because of the dollar’s strength and rising interest rates.
Earnings excluding some items will be $5.90 to $6.10 a share this year, the Miami-based company said Tuesday in a statement. Analysts projected $6.25 a share, the average of estimates compiled by Bloomberg. The company’s outlook for profit of about 30 cents in the current first quarter also fell short of the average 46-cent estimate.
While fuel costs have declined, that hasn’t been enough to offset the company’s exposure to currencies that have fallen against the dollar. The U.S. currency’s strength will cut earnings by 14 cents a share this year, the company said. Rising interest rates will also hurt by 6 cents a share, it said.
“If you just look at it year-over-year, our basket of currencies is down 10 percent,” Chief Financial Officer Jason Liberty said on a conference call Tuesday. He cited as an example China’s yuan, which he said has become more volatile since “it’s been unhitched from the U.S. dollar.”
Royal Caribbean’s forecast is a sign the strong dollar will continue to hurt U.S. companies that depend on foreign guests for revenue. Cruise lines had been enjoying a multiyear rebound, as global economies recovered and new ships and features let them raise ticket prices. Now even fast-growing markets such as China present currency risk.
Royal Caribbean was the biggest decliner Tuesday in the Standard & Poor’s 500 Index. The shares dropped as much as 18 percent to $69.30 in New York, the most in intraday trading since January 2009, and were down 16 percent to $70.62 at 3:12 p.m. They had already fallen 16 percent this year through Monday.
Sales in the fourth quarter rose 4.6 percent to $1.9 billion, the company said. Net income jumped 88 percent to $206.8 million, or 94 cents a share, from $109.8 million, or 49 cents, a year earlier.
Carnival Corp., the world’s largest cruise operator, fell 8.7 percent to $44.69 on Tuesday, while Norwegian Cruise Line Holdings Ltd. dropped 9.2 percent to $42.75. Norwegian is expected to report its earnings results later this month, with Carnival following in March.