Royal Caribbean Cruises Ltd. (RCL)

wisesilverwolf (95.58) Submitted: 11/13/2009 11:21:26 AM : Start Price: $23.48 RCL Score: -2.91

"If the flu would be much more significant then what we’ve seen so far then that is not included in the guidance that we’re giving." [from earnings transcript]

Bad news for RCL if anyone switches on the TV these days. Obama already declared a National Emergency over swine flu, and we have barely seen anything yet.

Bummer about that $6.8 billion in total debt as of June 30. Just as the global re/de-pression starts to kick in RCL is rolling out top of the line(rs) new cruise ships aimed at the high-end market. Around the world. With a jobless recovery and swine flu kicking off.

Ouch.

alan5757 (62.54) Submitted: 8/6/2009 3:34:36 PM : Start Price: $15.98 RCL Score: -42.00

Swine flu virus scare will spook cruisers and investors from this company

jstegma (99.72) Submitted: 4/24/2009 12:02:54 PM : Start Price: $9.90 RCL Score: -113.26

To buy this right now you'd have to believe Phil Graham's assessment that we're just a nation of whiners in a mental recession.

trkerjim (< 20) Submitted: 2/2/2009 4:44:27 PM : Start Price: $6.71 RCL Score: -225.59

large debt from new ship orders will hurt the bottom line and the discounting of cruise prices to fill the ship will further dilute the stock price. depending on the economic recovery of the world I think this could turn around in about 2 years due to newer ships and excellent service from the staff as a whole. they have a good training program for the help staff and while the cutbacks to someone that cruises a lot are starting to show I think they have good financial advisors working to keep you as happy as can be under these economic conditions

RiyazSA (63.59) Submitted: 12/19/2008 4:13:33 PM : Start Price: $12.52 RCL Score: -66.93

close in dec 09

ruinas (< 20) Submitted: 6/21/2008 10:33:50 PM : Start Price: $24.83 RCL Score: -11.63

Recessionary fervor will drive market lower.

TERESABB (23.78) Submitted: 5/23/2008 4:48:58 PM : Start Price: $28.19 RCL Score: -3.17

STOCK WATCHER LIST

moneyrocket (97.11) Submitted: 5/22/2008 11:59:44 AM : Start Price: $28.21 RCL Score: -4.09

Rising fuel costs and rising food costs will hit their profits hard. They also have a very heavy debt load which isn't good if times get tough. With consumers cutting back due to rising costs to travel they are very vulnerable.

beback123 (47.88) Submitted: 3/24/2008 2:59:26 PM : Start Price: $34.89 RCL Score: +15.01

YES THE COST OF FUEL IS RAISING THEIR COST, BUT CRUSING IS THE BIGGIE FOR VALUE FOR DOLLAR SPENT. ROYAL IS THE BEST MID LINE...

MK48 (44.44) Submitted: 1/7/2008 10:59:21 PM : Start Price: $37.08 RCL Score: +15.27

Taking a cruise is what economists called “luxury goods.” Facing uncertain economic outlook ahead, people will be ditching or delaying the purchase of higher price luxury goods. Unlike buying food or gasoline, a cruise vacation is completely optional. Given the condition of declining business outlook, cruise industry must do something to bring in the revenue. I'll bet you twenty bucks you’ll be seeing more vacancy rate on cruises and certainly more promotional pricing.

What does this have to do with the cruise industry and RCL? Promotional pricing and less people taking cruise means lower revenue per customer. Lower revenue equals lower net profit. Even if promotional pricing brings in the same number of customers before, profit margin is lower because fixed cost doesn’t change. If you take a look at RCL’s statistics, the company has 29 ships plus two more under construction. Wow. That’s a lot of ships. Plus it has to feed 4329 employees. Now let’s assume payroll head count is cut to 1000, and park 15 of the 29 ships, the fundamentals will continue to deteriorate. On top of that, RCL has to pay for the ships plus the interest on money it borrowed to build them. Ships will require maintenance whether it is operating or not. Saltwater is a hostile environment. How do I know? I am in the ship building business.

Let’s discuss the issue from fuel cost perspective. The general trend in the cruise industry is to go bigger, meaning ships of larger displacement. The rationale is once a ship goes above a certain size, number of people onboard is no longer a significant factor. (Moving bulkheads around in an existing ship and decrease room sizes is one way of increasing passenger capacity.) For example, to operate a 100,000 ton ship with 1000 people onboard will require X amount of fuel. To operate 101,000 ton ship with 1500 people onboard will require the same X amount of fuel (the difference is trivial). So hey, guess what?! Lower operating cost per person.

This is a double-edged sword, however. When business isn’t good, the ships still have to operate and generate revenue, as long as there is a chance to break even. So now, the company may be operating 101,000 ton ship with only 750 people onboard. Same X amount of fuel. Amount of fuel per passenger just doubled! Remember to factor in the promotional pricing to get the 750 passengers onboard!

We just saw crude oil price went above $100 mark a couple weeks ago. In the middle or late 2008, we’ll be seeing press releases from RCL citing fuel cost as a factor for declining net profit. RCL is already doing passing some of the fuel price increase to customers as “fuel supplement”.

Now here is the interesting part: we can use RCL (and the cruise industry) as an economic indicator. Government and various trades publish indexes or economic indicators month to month, or quarter to quarter. But a lot of times the indicators will flip-flop from one report to the next. For example, the housing indicator can be down for 6 months in a row, post a surprise positive, and then continue the downward trend. News media will sensationalize the flip-flop and use the words like “surprise gain” or “unexpected”.

It’s almost eerie how economic trends and RCL prices correspond to each other. Don’t believe me? Just look chart historical RCL prices over the last 10-15 years. Notice how the stock goes up during the internet boom, and how it goes down when the general feeling of the economy is sour after 2001.

Recommendation: wait and see. You can pick this company up at a better price. In the mean time, I think I’ll spend 30 bucks and go camping at a national park this summer.

dude59 (98.29) Submitted: 11/2/2007 1:11:14 PM : Start Price: $40.25 RCL Score: +16.05

less $$ for fun

olenoides (96.62) Submitted: 10/8/2007 1:23:20 AM : Start Price: $38.65 RCL Score: +11.42

* Headed into a consumer driven recession equals less people that can afford to take cruises.

* Very high debt load, with large servicing costs.

* Huge line items in their expenses for fuel and food, two items seeing experiencing heavy inflation.

Earnings are going to be hit hard in the next year...

cacseh (38.22) Submitted: 8/23/2007 3:34:22 PM : Start Price: $37.97 RCL Score: +15.25

American consumers will have less discretionary spending and access to credit will become more limited. The company has added new ships and long term debt which it may have trouble repaying.

MonkeyNdart (36.40) Submitted: 12/9/2006 4:48:56 PM : Start Price: $39.82 RCL Score: +21.61

I see MorningStar likes this one, but I have concerns that one terrorist attack on any cruise ship wouldl sting the whole industry. This wouldn't stop me from taking a RCL cruse - I have and I loved it, but it makes me hesitant to invest serious money.

A new concern I have about RCL is that I've seen several cases lately of this line having lots of passengers get sick. I don't know if the food tampering angle of these cases has been adequately investigated. Holland has a big radical Islamist problem, but the Dutch would rather be dead than politically incorrect. You can see plenty of Muslim name tags on the ships' food service workers - I wonder how good the screening process is.