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Royal Caribbean Group RCL

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Morningstar’s Analysis

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No News Is Good News at Royal Caribbean as Domestic No-Sail Closes In on a Full Year

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

No-moat Royal Caribbean wrapped up its final quarter of a difficult 2020, posting just $26 million in net revenue, down from $2 billion in the year-ago period, and an adjusted EPS loss of $5.02. As Royal’s ships largely remain off the seas (except for TUI and Quantum in Singapore), the prognosis for 2021 is opaque, but full-year losses are likely to persist, given the uncertainty about the start-sail date (currently May 1). As such, we look beyond the pandemic to assess what normalized EPS power for Royal might be. Commentary that second-half 2021 pricing is higher than 2019 indicates that demand still exists for the cruise product and that scarce supply in the near term supports higher pricing. Additionally, early first-half 2022 bookings also indicate improving yields. As a result of a healthy consumer travel appetite after the pandemic, we could lift our $53 fair value estimate by a single-digit percentage, but view shares as rich.

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Company Profile

Business Description

Royal Caribbean is the world's second- largest cruise company, operating more than 60 ships across six global and partner brands in the cruise vacation industry. Brands the company operates include Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises, and Silversea. The company also has a 50% investment in a joint venture that operates TUI Cruises and Hapag-Lloyd Cruises, allowing it to compete on the basis of innovation, quality of ships and service, variety of itineraries, choice of destinations, and price.

1050 Caribbean Way
Miami, FL, 33132, Liberia
T +1 305 539-6000
Sector Consumer Cyclical
Industry Travel Services
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type
Employees 85,000