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Management's conference call tone was positive, despite lower Q3 guidance. However, we remain cautious on Q4 guidance as pricing may not match the bullish volume commentary.

CONF CALL

  • Caribbean environment:  highly promotional
  • Core fleet has done well 
  • Getaway:  leads in guest satisfaction
  • Expanded casino partnerships
  • Tougher comps will ease in 4Q
  • Anticipate the promotional market to continue for the year and into early 2015
  • Europe:  Med continues to do well
  • 3Q:  tougher comps YoY (strategically held pricing in 3Q 2013 (ticket yields was up 5%);
  • Going forward, Breakaway yields expected to perform in-line with rest of fleet;  
  • Higher Caribbean capacity in Q3 (23%) is reason why yield guidance is lower in Q3  this holds no water since you have to Bermuda in the mix.  Q3 Caribbean+Bermuda capacity is 40% of total itineraries vs 32% year ago.
  • Overall, 2014 load is ahead of 2013
  • Q3 deployment:  23% in Caribbean, 32% in Europe, 17% in Bermuda, 18% in Alaska
  • 3Q:  doubling of Caribbean capacity YoY in Miami due to Getaway.  Absent its introduction, yields would be 200bps higher
  • Getaway 5-yr payback
  • 4Q:  easier Caribbean comps
  • Higher costs on new ship orders (2018-2019):  higher euros, new enhancements on ship; will take a little more than 5 yrs to pay back

Q & A

  • Started to see some booking traction (last 12 wks):  substantial growth (+20%) in booking activity
  • Q3/Q4:  solidly loaded over prior yr; can protect pricing
  • Cautiously optimistic 
  • Feel better about pricing
  • Cost volatility from Q3 to Q4:  food offerings, guest interaction investments from the NEXT program
  • 2015:  better loaded across the board than in 2014 and 2013; pricing looks good; beginning of a fundamental shift (most of pressure in Q1 (Super Bowl lap))
  • 2015 pricing should be solid
  • Feeling better about Caribbean in 2015 (excluding Q1)
  • Lower cost of sales
    • In Q2, have lowered port agreement costs
    • Have expanded casino players, with no incremental costs
    • Had done less air packages and aggressively negotiated with credit card companies
  • Hearing from Genting that they will not sell at current levels
  • Frustrated with stock price
  • Recently mandated a 3% price increase across fleet.... still seeing good volume
  • Alaska:  overall pleased.  Sun booked significantly better than 2013.
  • Europe:  Q2 pricing above 10% (because of easy comps in 2013)
  • Two ships year-around in Europe which benefits Q4, with signficantly higher pricing and load
  • Premiums on new ships:  across 12 months,  still double digit premiums but onboard could be impacted by a mix issue (larger families spend less onboard)
  • Don't have any 'old' ships; not looking to sell any ships