Please ensure Javascript is enabled for purposes of website accessibility

Why Royal Caribbean Stock Popped This Morning -- and Carnival and Norwegian Cruise Followed

By Rich Smith - Apr 29, 2021 at 11:33AM

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

Following Carnival's April earnings miss, Royal Caribbean delivers a beat.

What happened

Shares of cruise ship operator Royal Caribbean (RCL -4.77%) jumped out of the gate Thursday morning after reporting better-than-expected earnings (read "better-than-expected losses") for fiscal Q1 2021. Instead of analysts' expected $4.62-per-share loss, Royal Caribbean lost $4.44 per share (pro forma -- actual GAAP losses were $4.66 per share). The company also eked out a small "revenue beat," reporting sales of $42 million where Street analysts had predicted only $39.5 million.  

Royal Caribbean shares jumped nearly 6% in response in early trading, although they quickly retreated to just a 1.3% gain. Curiously, as of 10:20 a.m. EDT, two of Royal Caribbean's rivals that did not report earnings today are both doing even better. Carnival Corporation (CCL -5.33%) (CUK -4.95%) stock is up 2%, and Norwegian Cruise Line Holdings (NCLH -8.03%) is hanging on to a 4% gain. Earlier in the day, Carnival was up close to 5%, and Norwegian actually hit as high as a 7% gain.

3 cruise ships lined up abreast in port

Image source: Getty Images.

So what

So what sparked today's rally, and why does it seem to be losing strength so quickly?

Good news first: In addition to beating earnings -- in a nice contrast to Carnival's earnings miss earlier this month -- Royal Caribbean says it has "four ships already sailing" in regions not covered by the U.S. Centers for Disease Control and Prevention ban on cruising out of U.S. ports. The company also plans to put 11 more ships back in the water on Caribbean and European routes this summer, and it spoke positively about seeing "a pathway to a healthy and achievable return to service, hopefully in time for an Alaskan season" this year.  

Cruises are still "taking place with adjusted passenger capacity and the enhanced health protocols," but at least it's a start, and a way for Royal Caribbean to start generating revenues to begin covering some of its costs again.

And now the bad news: "The average monthly cash burn rate for the first quarter of 2021 was approximately $300 million ... slightly higher than" Royal Caribbean had previously guided toward. Granted, this was to be expected as the company begins reviving its fleet for a return to cruising. Granted, too, CFO Jason Liberty says that "cash flow from operations will sequentially improve, driven by an increase in the inflow of customer deposits," helping to cover rising capital expenditures. But for now we may be looking at a situation of accelerating cash burn with still very little revenue to offset the company's costs.

Now what

Because of this still-in-motion situation, Royal Caribbean says "the Company cannot reasonably estimate its financial or operational results" either next quarter or for the rest of this year -- which probably upset some investors today.

But you can look forward to the next cruise industry update when Norwegian Cruise reports its Q1 numbers two weeks from now, on May 12 (analysts predict a $2.05-per-share loss).  

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
$34.57 (-4.77%) $-1.73
Carnival Corporation Stock Quote
Carnival Corporation
CCL
$8.88 (-5.33%) $0.50
Carnival Corporation Stock Quote
Carnival Corporation
CUK
$8.07 (-4.95%) $0.42
Norwegian Cruise Line Holdings Ltd. Stock Quote
Norwegian Cruise Line Holdings Ltd.
NCLH
$11.46 (-8.03%) $-1.00

*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
323%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

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.