Q2 and Q3 look like beats although we’re not sure management will raise guidance when they report company earnings on Thursday




RCL will report Q2 earnings this Thursday morning.  We expect a Q2 beat and while Q3 guidance could match consensus estimates, our proprietary pricing survey is suggesting another beat in Q3.  Thus, we remain above the Street for 2014 as a much stronger Europe offsets a still struggling Caribbean market.



We expect Q2 net yields (constant-currency) and EPS to be 2.8% and $0.54, respectively, above the consensus EPS estimate of $0.52.  Given what we’ve seen out of Europe on pricing and bookings, we expect Q3 yield guidance of +4-5%, which should be enough to placate the bears.  For Q3, we’re forecasting 4.9% net yield growth and $2.19 in EPS versus the Street EPS estimate of $2.11. 



We usually prefer to focus on sequential pricing trends as YoY pricing indicators are highly volatile and weak in their predicative power in signaling price pivots.  However, we feel it is worthwhile to highlight the rapid ascent RCL has seen in European YoY pricing as this year has progressed.


As seen in the chart from our mid-July pricing survey below, we believe European pricing (as weighted by brand) have averaged 15% YoY growth for Q2 sailings and averaged 10% YoY growth for Q3 sailings.  Q4 pricing is trending close to double digits YoY as well.  Given the strength in bookings, particularly for the RC brand, European yields could be +20% for Q2 and +15% for Q3.  Europe will play a prominent role in Q3 as it accounts for 44% of all RCL sailings, compared with 22% in Q2.  





This ‘transformational’ ship is getting quite a lot of positive buzz.  In fact, it’s one of the few bright spots in the overcrowded, fiercely competitive Caribbean market.  Agents continue to rave about Quantum, which has held pricing for its winter itineraries since we started tracking in February.  We believe Quantum will easily take over the NJ/NY market for Winter 2014/Spring 2015 Caribbean sailings, at the expense of Norwegian Gem and Breakaway



As we look out to 2015, Quantum’s sister Anthem of the Seas is seeing increased demand for its summer 2015 sailings out of Southhampton.  RCL will need this surge as the company deals with some of the toughest comps and higher capacity in Europe.  China, while an exciting opportunity, will certainly be a wild card in the 2H of 2015.



We are encouraged by the sticky pricing driven partially by easy comps in Europe for the RCL brands.  Given the persistently weak pricing in the overcrowded Caribbean market, to which RCL is not immune, we do not believe RCL will raise its previously disclosed FY 2014 net yield guidance of 2-3%. However, RCL will receive a big lift in Q4 Caribbean when Quantum of the Seas hits the market in November 2014.  As we’ve seen multiple times, investors are giddy whenever a media-happy new ship is about to be deployed.

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more