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: Cruise stocks mostly higher after CDC’s ‘very constructive’ letter, Royal Caribbean results

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Shares of cruise operators traded mostly higher Thursday, as upbeat government guidance on the potential restart of U.S. sailings in the coming months and a narrower-than-expected first-quarter loss reported by Royal Caribbean Group gave investors reason to cheer.

Royal Caribbean Chief Executive Richard Fain said in the company’s post-earnings conference call with analysts that in a letter to cruise executives Wednesday evening, the Centers for Disease Control and Prevention issued “multiple, very constructive clarifications” on its conditional sail order, as the suspensions of U.S. sailings has passed the one-year mark.

“They’ve addressed many of the items that concerns us in the order, in a manner that takes into account the recent advances in vaccines and medical science,” Fain said, according to a FactSet transcript.

See related: Cruise industry spars with CDC over reopening.

While there are still a “great many details” to be provided, he said the CDC’s guidance provides a “clear and achievable pathway” toward a return to cruising in the near future.

“It could be possible to restart cruising by mid-July,” Fain said.

Fain said one of the strongest discussion points Royal has had with the CDC regarding the safe and healthy return to cruising has been the data collected from Royal’s cruises that have been operating in Asia and Europe.

Of the more than 125,000 passengers Royal cruises have carried, there have only been 21 COVID-19 cases, all of which has been experienced before vaccines were available. That represents a positivity rate of 0.01%, Fain said. That compares with the latest data from the CDC showing an average positivity rate in the U.S. of 5.2% over the past seven days.

Royal’s stock
RCL,
-2.46%

fell 0.7% in morning trading, reversing an earlier intraday gain of as much as 5.7%. The stock was still up 1.4% this week, while the S&P 500 index
SPX,
-0.02%

has edged up just 0.3%.

Elsewhere, shares of Carnival Corp.
CCL,
-0.58%

CCL,
+0.44%

tacked on 0.8% Thursday and Norwegian Cruise Line Holdings Ltd.
NCLH,
+0.58%

climbed 2.4%.

Separately, Royal reported before Thursday’s open a narrower-than-expected first-quarter loss, while revenue plunged 98% and cash burn was higher than previously estimated.

Net losses for the quarter were $1.13 billion, or $4.66 a share, after a loss of $1.44 billion, or $6.91 a share, in the same period a year ago. Excluding nonrecurring items, losses widened to $4.44 a share from $1.48, but beat the FactSet per-share loss consensus of $4.61.

Total revenue dropped 97.9%, to $42.0 million from $2.03 billion, compared with the FactSet consensus of $43.9 million, as passenger ticket revenue fell 98.5% and onboard and other revenue declined 96.8%.

The average monthly cash burn rate during the first quarter was $300 million, which was higher than the guidance range provided in February of $250 million to $290 million, as a result of restart expenses and timing.

Cruise bookings for the second half of 2021 is “aligned” with the anticipated resumption of cruising, while pricing on those bookings is higher than the pre-pandemic 2019 period. For the first half of 2022, advance bookings have been within historical ranges but at higher prices when compared with 2019.

“We are prepared and eager for the flywheel to start turning again,” said Chief Financial Officer Jason Liberty. “Moreover, we are optimistic that with the gradual resumption of cruise operations, our cash flow from operations will sequentially improve, driven by an increase in the inflow of customer deposits.”

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