Royal Caribbean Cruises Earnings Tumble 98 Percent

Royal Caribbean Cruises Ltd. said Thursday that fourth-quarter earnings tumbled 98 percent, missing Wall Street's expectations and reflecting a sharp drop in cruise bookings, higher-than-expected fuel costs and unfavorable foreign exchange rates.

For the quarter ended Dec. 31, net income fell to $1.4 million, or 1 cent per share, from $70.8 million, or 33 cents per share, a year ago.

Revenue dipped 2 percent to $1.46 billion from $1.49 billion in the fourth quarter of 2007.

Analysts polled by Thomson Reuters forecast earnings of 7 cents per share on revenue of $1.46 billion.

Royal Caribbean said net yield dropped 5.9 percent during the quarter, due to a sharp drop in bookings after the financial crisis in September. Net yield reflects cruise revenue earned by the company without some variable costs like commissions and transportation.

The company said unfavorable foreign currency rates led to a steeper net yield drop than its forecast of a 4 percent to 5 percent decline.

Royal Caribbean said its results also suffered from higher-than-expected fuel and insurance costs. While crude oil prices dropped during the quarter, Royal Caribbean said at-the-pump pricing was higher than anticipated.

For the full year, earnings totaled $573.7 million, or $2.68 per share, compared with $603.4 million, or $2.82 per share, in 2007.

Full-year revenue rose 6 percent to $6.53 billion from $6.15 billion in the prior year.

Analysts forecast 2008 earnings of $2.73 on revenue of $6.53 billion.

For the key "wave period" — the time from January through March when cruise bookings are generally higher — Royal Caribbean said it has stabilized bookings by cutting prices dramatically.

"The start of the wave period has produced booking volumes consistent with last year, albeit at significantly lower prices," said Chief Financial Officer Brian Rice in a statement.

The company said the revenue outlook is expected to remain weak this year.

The Miami-based company forecast a first-quarter loss between 30 cents and 35 cents per share, compared with analysts' expectations for a loss of 8 cents per share.

For 2009, Royal Caribbean expects to report a profit of about $1.40 per share. Analysts forecast a full-year profit of $1.67 per share.

Net yields are expected to drop between 14 percent and 16 percent in the first quarter and between 9 percent and 13 percent for the full year.

"We recognize this will be a very challenging year and do not expect any quick turnarounds in our pricing," Rice said. "Consumers are certainly delaying their purchase decisions, but as they get closer to their vacations, they appreciate a great value and are buying cruises."

The company also noted that volatility in commodity prices, exchange rates and other economic factors makes forecasting more difficult than usual.