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If uncertainty really is worse than bad news itself, then the coronavirus outbreak may very well be Royal Caribbean Cruises Ltd. Chief Executive Richard Fain’s worst nightmare.
“Obviously the biggest issue of the day is the Wuhan coronavirus….Unfortunately, no one knows how this outbreak will play out and we don’t know how it will ultimately impact us,” Chief Executive Richard Fain said in a post-earnings conference call.
“Obviously the biggest issue of the day is the Wuhan coronavirus…Unfortunately, no one knows how this outbreak will play out and we don’t know how it will ultimately impact us.”
Fain said while future cruise bookings in China are expected to be affected, “but again, we just don’t know,” according to a FactSet transcript. And although he hasn’t seen a big impact on bookings outside of China, “but again, and here I’m sounding like a broken record, we just don’t know.”
The company said it expects earnings per share, excluding nonrecurring items, of 80 cents to 85 cents for the first quarter, well below the FactSet consensus of $1.15, and of $10.40 to $10.70 for 2020, which surrounds expectations of $10.48.
But Chief Financial Officer Jason Liberty said because there remains “too many variables and uncertainties” relating to the coronavirus, the guidance ranges “do not include any financial impact that relates to this very fluid situation.”
Liberty said headwinds having an “outsized impact” on the first-quarter outlook outside of coronavirus include the “unprecedented” bush fires in Australia and recent activities in the Middle East.
Analyst Tuna Amobi at CFRA cut the stock’s price target to $135 from $150, but kept the rating at buy, as the “near-term disruption” related to the coronavirus outbreak was offset by a “longer-term bullish outlook” for China.
Royal Caribbean’s stock RCL, +1.33% rose 1.4% at last check on Tuesday. It has lost 12.5% since closing at a record high of $135.05 on Jan. 17.
Here’s what Royal Caribbean does know about coronavirus:
• Eight cruises out of China ending March 4 have been canceled and other itineraries in the region have been modified, which overall have had an estimated impact to earnings of 25 cents a share.
• Individuals who have traveled “from, to or through” mainland China and Hong Kong in the past 15 days will be denied boarding. They will receive full refunds.
• Health screenings will be mandatory for guests who have been in contact with anyone who has traveled from, to or through mainland China or Hong Kong.
• Anyone holding a China or Hong Kong passport, regardless of when they were last in China or Hong Kong, will be required to undergo a health screening.
• Guests who report “feeling unwell or demonstrate flu-like symptoms” must undergo health screenings.
Separately, Royal Caribbean reported fourth-quarter net income that fell to $273.1 million, or $1.30 a share, from $315.7 million, or $1.50 a share, in the same period a year ago. On an adjusted basis, EPS slipped to $1.42 from $1.53, matching the FactSet consensus of $1.42.
Revenue rose 7.9% to $2.52 billion, but was just shy of the FactSet consensus of $2.54 billion, as passenger ticket revenue grew 8.0% to $1.78 billion and onboard and other revenue increased 7.7% to $733 million.
Royal Caribbean’s stock has dropped 11.5% year to date and slipped 0.7% over the past 12 months. In comparison, the S&P 500 index has gained 2.3% this year and has run up 21.3% over the past year.
