RCL Q1 2015 CONF CALL NOTES

Takeaway: Eastern Med issues and worse non-US onboard spend accounted for lower yield guidance. Asia (ex China) also mixed. The momo is over.

RCL Q1 2015 CONF CALL NOTES - 11

 

RCL Q1 2015 CONF CALL NOTES - 2

Source: RCL

 

CONF CALL

  • Anthem of the Seas has been 'quite profitable and generating strong returns'
  • Quantum of the Seas bookings in China has been 'heartwarming'
  • Double-Double program still on track
    • Hedgeye is skeptical
  • China now represents 6% of capacity at a higher level % of the company's profitability
  • Bookings curve moved forward since they marketed sailings earlier than usual; thus, less need to offer late-minute discounts
  • In March, adopted new policy that they will not offer late-minute discounting in North America (excluding 2-4 night itineraries). This may negatively impact short-term bookings but believe this is the right method over the long-term.
  • Strength in close-in pricing in Caribbean boosted Q1. Caribbean capacity had 69%.
  • Quantum had significantly higher premiums vs rest of fleet
  • At this point, Booking and APDs are higher vs same time last year
  • Previous guidance already incorporated better Caribbean pricing in Q2-Q4 
    • Continue to expect low single digit yield increase in Caribbiean sailing
  • Europe:  volumes slightly down vs 2014. Capacity up 5% YoY.  Strength coming down Baltic/Med doing well. Eastern Med are soft, particularly Turkey. Still see mid-single digit yield increase in 2015.
  • Asia:  in 2015, capacity accounts for 15%.  Asia itineraries, as a whole, has been trending well but individual itinerary's performance vary. Quantum is booked 80% for the summer 2015.  2016 is looking good as well.
    • We agree. As we wrote in "RCL: HOT ASIA BOOKINGS", Quantum bookings have been stellar. But pricing performance is mixed particularly with the older fleet underperforming in non-China itineraries.
    • Expect low to mid single digit yield increase.
  • Lower Fuel consumption due to better fuel initiatives. 
  • 2Q 2015: capacity mix: 37% Caribbean, 25% Europe, 10% Alaska, 10% China

 

Q & A

  • China: 66% more capacity in China this year.  Good yield growth but not double digit growth this time around.
  • Southeast Asia: yields are flattish.  
  • Australia:  yields are up slightly
  • Consumer pay bundled packages in non-US$
  • Onboard rev will still have a record year
  • 150bps change from Q2 -Q4 ; half of it on anticipation of weaker non-US onboard spend. Another half of it is on Eastern Med and new NA pricing pricing policy mentioned above
  • Is new NA pricing policy shared by their competitors? They don't think so.
  • Repositioning is great for Quantum but lower yields for everyone else who has repositioned.
    • We've been concerned about the underperformance of the pre-2006 fleet.
  • Why NCC ex fuel much higher in 2Q? mostly due to Quantum repositioning to China
  • Relative to guidance in October 2014, currency impact -$0.59, +$0.54 fuel impact.  Relative to guidance in Jan 2015, -$0.36 (-$0.15 (fuel), -$0.20 (FX).
  • Committed to keeping costs down this year and next year
  • 2-4 itineraries is only a small portion of their NA itineraries
  • FX impact onboard spend depends on exposure (see chart above)

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more