Royal Caribbean Cruises Ltd. RCL posted mixed second-quarter 2016 results, as the bottom line outpaced the Zacks Consensus Estimate while the top line lagged the same.

Adjusted earnings of $1.09 per share beat the Zacks Consensus Estimate of $1.02 by 6.9% and were above management’s guidance of $1.00 on the back of lower-than-expected fuel expenses. Further, earnings increased nearly 30% from the year-ago tally of 84 cents.

Royal Caribbean Cruises Ltd. (RCL) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Total revenue increased 2.3% year over year to $2.11 billion, driven by higher onboard spending as well as passenger ticket revenues. However, revenues missed the Zacks Consensus Estimate of $2.17 billion by 2.9%.

Quarter Highlights

On a constant currency basis, net yields increased 1.1% year over year, in line with the guidance.

Passenger ticket revenues were up approximately 0.6% to $1.52 billion. Onboard and other revenues also increased 6.9% to $588.7 million.

Net cruise costs (NCC), excluding fuel, increased 1.9% on a constant currency basis, and were in line with management’s guidance.

Total cruise operating expenses decreased roughly 0.4% year over year to $1.31 billion mainly due to a decline in fuel expenses as well as onboard and other expenses. The decrease was partly offset by higher payroll expenses and other operating costs.

Q3 Guidance

Royal Caribbean expects adjusted earnings per share of $3.10 per share in the quarter, below the Zacks Consensus Estimate of $3.37 per share.

Constant-currency net yields are projected to increase 2%. Notably, the year-over-year improvement is mainly driven by the deconsolidation of the Pullmantur Group.

NCC, excluding fuel, is likely to be down 1.5% at constant currency.

2016 Guidance

Royal Caribbean’s adjusted EPS is estimated in the range of $6.00–$6.10, down from the prior guidance of $$6.15–$6.35. The Zacks Consensus Estimate for 2016 is pegged higher at $6.21. The company slashed its earnings guidance in view of the negative impact from currency and fuel rates of nearly 27 cents.

The company's bookings for the remainder of 2016 are strong, similar to last year's record levels.

The company expects net yields to increase about 4–4.5%, compared to the prior guidance of 2.5–4%. Strong demand trends for North American sailing will more than offset weak demand in the Eastern Mediterranean and Shanghai.

NCC, excluding fuel, on a constant currency basis, is expected to be up 1%.

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Zacks Rank & Stocks to Consider

Royal Caribbean presently has a Zacks Rank #4 (Sell). Better-ranked stocks in the sector include Diamond Resorts International, Inc. DRII, Vail Resorts Inc. MTN and Pool Corp.POOL. All the three stocks carry a Zacks Rank #2 (Buy).