Royal Caribbean Cruises Ltd. (RCL) reported second-quarter 2010 non-recurring earnings of 28 cents per share, well ahead of Zacks Consensus Estimate of 19 cents and the year-earlier quarter’s loss of 22 cents. Strong results came on the back of an improvement in net yields and strict cost control.

Total revenue in the quarter jumped 23.1% year-over-year to $1.60 billion, almost in-line with the Zacks Consensus Estimates of $1.61 billion. The year-over-year increase in revenue was driven by a rise in ship capacity combined with net yield improvements.

Net yields upped 4.9% year-over-year wiping out the adverse impact from the strengthening of the U.S. dollar led by concerns over European sovereign debt. The rise in yield was driven by a 7.1% improvement in net ticket yields and moderate increase in on-board revenue. Net yields at Royal Caribbean were up 5.4% at constant currency. Occupancy rate also spiked to 103.6% from 102.3% in prior-year’s quarter.

Total cruise operating expenses increased 12.5% year-over-year to $1.1 billion in the second quarter. Net cruise costs (NCC) per passenger including fuel dipped 2.8% year over year despite the sharp rise in oil prices in the quarter.

Financials

As of Jun 2010, total assets stood at $18 billion. Royal Caribbean’s net debt was 51.8% of capital as of Jun 30, 2010, compared with 52.0% as of Dec 31, 2009. On a year-to-date basis, net cash from operating activities was $1.0 billion while its capital expenditure was $847.5 million.

Outlook

For the third quarter, Royal Caribbean expects earnings per share to range between $1.52 and $1.57. Net revenue yields are expected to increase approximately 4% (at constant currency net revenue yields are expected to rise around 7%). Including fuel expenses, net cruise costs are expected to be down 1%. Fuel costs are expected to be $170 million in the upcoming quarter.

For full-year 2010, management raised earnings per share outlook to the range of $2.25 to $2.35 from $2.15 to $2.25. Net revenue yields are expected to be up 3% to 4% (at constant currency net revenue yields are estimated to go up 4% to 5%). Net cruise costs including fuel are projected to be down 1% to 2%. Fuel expenses for 2010 are at present expected to be at $652 million per metric ton.
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