HomeMarket NewsRoyal Caribbean's Strong Demand and Bookings Drive Profit Growth

Royal Caribbean’s Strong Demand and Bookings Drive Profit Growth

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Mariner of the Seas cruise ship docked at Genoa harbor

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Royal Caribbean, a leading cruise line operator listed on the NYSE under the ticker symbol RCL, reported impressive results for the quarter, surpassing expectations on both the top and bottom lines. The company also raised its full-year profit guidance, citing strong demand and bookings.

Despite the positive news, the stock initially retreated before the market opened, with RCL down 0.9% to $81.50. Rival cruise operators Carnival (CCL) and Norwegian Cruise Line Holdings (NCLH) also experienced a reversal in their stock prices, declining 0.7% and 0.4%, respectively.

In Q3, Royal Caribbean delivered adjusted earnings per share of $3.85, surpassing estimates by 46 cents. The company’s revenue of $4.2 billion marked a significant 40.5% year-over-year increase and exceeded expectations by $140 million.

The strong performance can be attributed to robust demand in both North American and European markets, resulting in higher load factors and pricing. Royal Caribbean carried nearly 2 million passengers in Q3, compared to approximately 1.7 million in 2022 and 2019. The quarter’s occupancy rate stood at 109.7%, outpacing the rates of 96.3% in 2022 and 110.5% in 2019.

The rebound in demand for cruises, offering diverse activities in a single space at a more affordable price compared to land vacations, has been a key driver for the cruise industry in 2023. Carnival, the world’s largest cruise line operator, also highlighted strong demand in its Q3 results released in late September.

This surge in demand has enabled cruise line operators to offset rising fuel costs through price hikes for itineraries. Royal Caribbean stated that fuel pricing and foreign exchange rates impacted Q3 earnings per share by approximately 18 cents.

Comparing Q3 2019 figures, Royal Caribbean’s gross margin yields increased by 19.1%, while net yields rose by 16.7% in constant currency terms.

Looking ahead, Royal Caribbean revised its full-year adjusted earnings per share guidance to $6.58-$6.63, up from the previous range of $6.00-$6.20. Analysts estimate an EPS of $6.03. The company expressed confidence in continued strong demand for 2024, with bookings surpassing levels seen in previous years and extending the booking window.

For the fourth quarter, Royal Caribbean anticipates adjusted earnings per share of $1.05-$1.10, while the consensus estimate stands at $0.97.

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