Please ensure Javascript is enabled for purposes of website accessibility

Royal Caribbean Warns a Sailing Ban Beyond the Third Quarter Could Materially Undermine Business

By Rich Duprey – May 21, 2020 at 12:29PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

As the country reopens, it's hard to predict what cruises will look like.

As long as the sailing industry is able to get back to booking cruises by late summer, Royal Caribbean (RCL -5.49%) says its business will survive. But if the no-sail ban currently in effect until July 20 is extended, and goes beyond the third quarter, the cruise ship operator warns it will suffer serious consequences.

While the country has been slowly reopening, businesses have taken initiatives to ensure their customers conform to the social distancing guidelines currently in place. The confined quarters of a cruise ship, where some widespread COVID-19 outbreaks occurred, may present a larger challenge.

Cruise ship at sea

Image source: Getty Images.

Shiver me timbers

Royal Caribbean's earnings were worse than expected, with adjusted losses of $6.90 per share. Analysts have taken that into consideration, and while some think pricing will weaken substantially in the future, others see demand picking back up strongly, though perhaps not this year.

However, in the cruise ship operator's quarterly report filed with the SEC this morning, Royal Caribbean had a warning for investors.

It said it is "targeting mid-summer of 2020 to begin sailings; however, if the ban on cruising is extended beyond the third quarter of 2020, it will have a material adverse impact on our current and forecasted liquidity levels."

The cruiser is working with the Centers for Disease Control on developing enhanced safety protocols, but as it is burning through $250 million every month, that's only good if it's able to sail again.

 

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
RCL
$44.42 (-5.49%) $-2.58

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.