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Huge Q1 but significant guidedown for Q2-Q4.  Strange.

“The year started off with a roar — strong bookings, low costs and solid profits — and in the first quarter every one of our brands exceeded its forecast. Unfortunately, the events in Northern Africa and Japan have turned what was shaping up as a spectacular year into merely a very good one.  Nonetheless, other than adjustments for fuel pricing, our earnings guidance for the year is essentially intact despite these dramatic geopolitical events.  The demand for the majority of our products has remained quite strong and even the impacted itineraries have begun to improve.”

-Richard D. Fain, chairman and chief executive officer


  • 1Q
    • Improvement in both ticket and onboard revenue yields and across all major product groups.
    • Costs were controlled; Due to timing, some costs shifted to later in 2011.
    • At the pump fuel: $511/metric ton
    • Fuel option portfolio increased by $24.2MM ($0.11 EPS) and the associated gain was booked to Other Income/(Expense) 
  • Q2 guidance:
    • EPS $0.40-0.45 vs consensus at $0.56
    • Net yields:
      • Reported: +5% vs consensus at +5.1%
      • Constant currency: +1 to 2%
    • NCC:
      • Reported: +5%
      • Constant currency: +3%
      • Ex-fuel reported: +4 to 5%
      • Ex-fuel constant currency: +2%
      • Fuel: 317K metric tons
      • Fuel expenses: $189MM
  • FY 2011 guidance
    • Net yields:
      • Reported: +5 to 7% (previously +4 to 6%)  vs consensus at +4.9%
      • Constant currency: +3 to 5%
    • NCC:
      • Reported: +5 to 6%
      • Constant currency: +4%
      • Ex-fuel reported: +4 to 5%
      • Ex-fuel constant currency: +2 to 3%
    • Fuel: 1.326M metric tons
    • Fuel expenses: $770MM
    • Three significant factors have influenced the company’s outlook on yields: geopolitical events, the weakening of the U.S. Dollar and increased tour activities.
    • Two of the factors influencing the company’s yield outlook, currency exchange rates and increased tour activities, are also affecting NCC guidance.
  • Higher food and transportation costs offset by savings initiatives in other areas
  • Fuel hedges: 56% for the remainder of 2011 at $75 bbl; 55% hedged for 2012 at $86 bbl; 40% hedged in 2013 at $91 bbl; 10% hedged in 2014 at $103 bbl; 
    • WTI Fuel options at strike prices ranging from $90 bbl to $150 bbl cover an additional 44%, 25%, and 11% of estimated consumption in 2011, 2012 and 2013, respectively.
  • The slowdown in Mediterranean bookings following unrest in Northern Africa have returned to normal levels as a result of lower pricing. 
  • Caribbean and Alaskan itineraries continue to show better than expected YoY improvement
  • Cash + undrawn RC: $1.6BN
  • Capex: $1.1BN, $1.2BN, $500MM and $1.1BN in 2011, 2012, 2013, and 2014, respectively
  • Capacity increases: 7.5%, 1.4%, 2.2% and 0.7% in 2011, 2012, 2013, and 2014, respectively


  • Managing through geopolitical events effectively
  • Over less few weeks, bookings in Mediterranean returned back to normal at lower pricing
    • Europe: expect yield increase in mid-single digits
  • Improvements in 1Q will continue into rest of 2011
  • Expect 2011 to be almost as strong as originally hoped
  • Strength in Caribbean and Alaska offset weakness from reduced bookings from Japan and Egypt
  • Focus on improving pricing; +1% in pricing improves EPS by 25 cents
  • Capex estimates have been raised due to Project Sunshine, refurbishments, and green technology investments
  • Close-in bookings higher than expected particularly in Caribbean and Brazil
  • Fuel costs: $2MM better than expected due to swap gains
  • $24MM gain on Mercury sale: will be recognized in an extended period
  • Higher fuel prices: 30 cents impact
  • Geopolitical impact: 20 cents on EPS and -1% on yields
  • 10% in fuel price translates into $30MM in costs, ex fuel option impact
  • Japan/Egypt will be felt in 2Q
  • Increased Pullmantur Tour activity primarily in 2H 2011
  • Low European itinerary visibility for 2012
  • Celebrity Silhouette: final stages of construction; will sail in July
  • Celebrity Constellation: onboard/ticket revenues have been good
  • Celebrity ships: volume and prices were stronger than expected
  • Celebrity Millennium (2012-2013): will go to Far East (will be solsticized)


  • Ex. currency, Pullmantour expansion, and geopolitical impact, everything else is same as in January 
  • UK prices substantially higher YoY; Expect successful UK market this summer
  • Sourcing mix in Europe: US passengers less than 25%
  • Much fewer people flying to cruises
    • Direct air passengers less than 10%
  • Mediterranean: still discounting but volume is back; pricing is relatively stable now
  • When will yields peak?
    • 3Q
  • Cannot provide rolling 12-month bookings but quarterly, it has been linear
  • Have raised prices in Alaska, Caribbean, and Bermuda as well as Northern Europe
  • Caribbean: outlook positive
  • G&A: very controlled; but maybe more marketing expense to drive top line