Key points:
- Cruise operator Royal Caribbean suffers on Q4 earnings due to Omicron travel issues
- Revenue and EPS miss, but the company looks towards a return in profit in H2 this year
- With the travel sector poised for a rebound, Royal Caribbean could be one to watch
Like most, if not all travel companies, the pandemic closed the door on promising revenue growth. Travel restrictions coupled with general fears made the travel landscape almost non-existent. Just as we thought the woes were over, Omicron threw a further spanner in the works. For Royal Caribbean (NYSE: RCL), the variant surge forced cruise operators to alter trip itineraries to navigate particular restrictions, as well as all-out cancellations – a huge blow to the popular industry.
The market has remained relatively immobile in reaction to Royal Caribbean’s missed earnings; with stock slipping just 1% with the opening bell on Friday. In the quarter ending 2021, total revenue came in at $982.2M, missing analyst estimates of $1.04B. Similarly, the company’s adjusted net loss was also larger than expectations of $3.92 per share, coming in at $4.78.
However, it isn’t all doom and gloom for Royal Caribbean. The travel sector is poised for a powerful rebound – should Covid continue to die down – and the cruise operators are predicting a strong return in the second half of this year.
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So, although forecasting a net loss for the first half, hopes for a rebound in travel mean the company predicts a return in profitability for the final six months of 2022. Analysts expect a return to profits in Q2.
On the back of this, Royal Caribbean has also clarified that bookings have started to pick up with the turn of the new year and that today, bookings were at pre-pandemic levels. This is reassuring news for investors, but in this current environment, it’s best to act with caution; we never know if a new variant could send the travel sector back into the red.
