Royal Caribbean Cruises Ltd.'s third-quarter net income rose 14 percent as it made more money from cruise passengers and demand grew for its Caribbean and Alaskan itineraries.
But the cruise operator on Thursday lowered its full-year earnings guidance to a level below analysts' expectations, citing the strengthening dollar and a fuel-related charge.
Companies like Royal Caribbean that sell services internationally get stung by a stronger dollar when they convert revenue in foreign currencies back into the dollar.
The news did not appear to rattle investors, as the Miami company said that 2012 demand is solid so far, with pricing higher than it was this time a year ago.
Its stock rose $1.61, or 5.6 percent, to $30.52 Thursday.
The cruise industry took a hit during the recession, as consumers pulled back on their discretionary spending and travel budgets. But as economic conditions have gradually improved, consumers have started to take cruises again.
Royal Caribbean and Carnival Corp. are considered bellwethers for the sector. They provide travel from the U.S. and abroad.
Royal Caribbean earned $399 million, or $1.82 per share, for the period ended Sept. 30. This is better than its earnings of $350.2 million, or $1.61 per share, a year ago.
Taking out 8 cents per share for a fuel-related charge, earnings were $1.90 per share.
The performance topped the $1.88 per share that analysts surveyed by FactSet expected, on average.
Revenue rose 13 percent to $2.32 billion from $2.06 billion. This beat Wall Street's forecast of $2.29 billion.
Net yields, which measures the amount a cruise company makes from its passengers after removing expenses, climbed 5.3 percent.
Passenger ticket revenues rose to $1.73 billion from $1.52 billion, while onboard and other revenue increased to $587.7 million from $540.1 million. The increase in onboard revenue is a good sign, as it shows people are willing to spend a bit more on "extras" during their vacation. Many travelers clamped down on onboard spending during the recession.
Royal Caribbean said its Eastern Mediterranean cruises were less popular during the quarter. Demonstrations and protests in the region, which includes Greece, have made it less appealing to tourists and prices have dropped. To deal with that, CEO Richard Fain said Royal Caribbean has shifted itineraries to other, more popular markets, such as the Caribbean.
The company, whose brands include Celebrity Cruises and Royal Caribbean International, cut its 2011 earnings outlook to a range of $2.70 to $2.80 per share. Its prior guidance called for earnings between $2.85 and $2.95 per share.
For the fourth quarter, typically the cruise company's weakest, Royal Caribbean anticipates earnings in a range of 9 cents to 19 cents per share. Wall Street had forecast earnings of 22 cents per share for the last months of the year and $2.83 for all of 2011.
Harry Curtis of Nomura Equity Research said in a client note that the fourth quarter typically makes up just 7 percent of Royal Caribbean's earnings for the year.