Royal Caribbean Warns Of Q2 Loss, Sees Sailings Suspended Until July 31

Royal Caribbean Cruises Ltd. (RCL) warned Wednesday that it expects to post a net loss in the second quarter as the magnitude and duration of the coronavirus pandemic remains uncertain. Shares dropped 2.7% to $41.03 in afternoon trading.

The ailing cruise operator said it will need to pay between $590 million to $610 million in interest on its debt for the rest of the year. Royal Caribbean also disclosed that it expects to continue to halt its sailings until July 31, after previously saying it may resume operations in June.

In response to the outbreak of the coronavirus pandemic, Royal Caribbean on March 13 suspended its global cruise operations leading to the cancellation of 130 sailings during the first quarter. The company said it estimates its cash burn to be, on average, in the range of about $250 million to $275 million a month during a prolonged suspension of operations.

Taking steps to cope with the financial fallout of the sailings halt, the embattled cruise operator this month raised $3.3 billion through a debt sale, improving its liquidity position by about $1 billion, it said.

For the first quarter ended March 31, Royal Caribbean reported a net loss attributable to the company of $1.44 billion, or $6.91 per share compared to a net income of $249.7 million, or $1.19 earnings per share year-on-year.

Excluding one-time items, the cruise operator lost $1.48 per share, much more than analysts’ expectations of 63 cents loss per share.

As of April 30, Royal Caribbean had $2.3 billion in cash and cash equivalents. The company expects debt maturities for the rest of 2020 and 2021, of $0.4 billion and $0.9 billion, respectively, as of May 19.

Ahead of the financial results, Wedbush analyst James Hardiman last week maintained his Buy rating on the stock with a $63 price target, saying that this year’s steep 70% decline in the stock is “overdone”.

“RCL is a high-risk trade during the short and medium term,” Hardiman wrote in a note to investors. “Longer-term however, while peak demand is likely impaired and peak earnings power has certainly been reduced, we believe RCL has positioned itself to eventually emerge from the pandemic and ultimately flourish.”

The rest of Wall Street analysts is more cautiously optimistic than Hardiman. The stock’s 12 analyst ratings consist of 7 Buys, 4 Holds and 1 Sell adding up to a Moderate Buy consensus. The $60 average price target implies 46% upside potential in the shares in the coming 12 months. (See Royal Caribbean stock analysis on TipRanks).

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