Royal Caribbean Revenue Jumps 7-Fold as Cruise Demand Rises

Occupancy beats estimates as profit comes in below expectations

Royal Caribbean Icon of the Seas - Chill Island
Royal Caribbean Earnings.

Courtesy of Royal Caribbean International

Key Takeaways

  • Royal Caribbean's posted third-quarter adjusted earnings of $0.26 per share, below estimates.
  • Shares dipped before rebounding.
  • The company noted "strong" early booking trends for 2023.
  • It set three long-term performance goals to exceed 2019 profitability by 2025.
Royal Caribbean Earnings Results
Metric  Beat/Miss/Match Reported Value Analysts' Prediction
Adjusted EPS ($) Miss 0.26 0.33
Revenue ($B) Match 3.0 3.0
Occupancy Rate (%) Beat 96.3 92.9

Royal Caribbean Financial Results: Analysis

Royal Caribbean Cruises Ltd. (RCL), the largest U.S. cruise company by market value, rose more than 6% in New York trading after reporting a seven-fold increase in revenue and better-than-expected occupancy rates amid a recovery in cruise travel, even as its first quarterly profit in almost three years was below forecasts.

The company reported adjusted net income per share of $0.26 for the third quarter, 20% less than expected. Revenue rose to $3 billion, matching estimates, compared with $457 million a year earlier, and occupancy jumped to 96%, 3 percentage points higher than estimated.

Royal Caribbean's Outlook

The company said it expects lose money again in the fourth quarter, projecting a loss of $1.30 to $1.50 per share on revenue of about $2.6 billion. That trailed estimates compiled by FactSet of a loss of $0.71 per share on $2.7 billion in revenue. Royal Caribbean shares fell as much as 5% before rebounding by 11 a.m. Eastern Time.

Royal Caribbean expects a fourth-quarter occupancy rate of 95%, saying it has "strong early booking trends for 2023," adding that all quarters are booked "within historical ranges at record pricing," according to the earnings release. Royal Caribbean projected "a return to historical load factors in early summer, record yields and adjusted EBITDA for 2023."

The cruise line's occupancy, or load factor, consistently exceeded 100% before the pandemic based on the presence of a third passenger in some cabins. Full occupancy assumes two passengers per stateroom.

A 'Trifecta' of Long-Term Objectives

Royal Caribbean also unveiled long-term goals aimed at exceeding its pre-pandemic profitability metrics by the end of 2025. The company is targeting adjusted EPS to reach at least $10 and a return on invested capital of at least 13%.

To reach those goals, Royal Caribbean must keep servicing and refinancing a debt load in excess of $23 billion that it accumulated as the pandemic halted cruises for more than a year. The company faces debt maturities of $2.1 billion in 2023 and $4.6 billion in 2024. The interest rate on the unsecured notes it sold in August to refinance 2022 and 2023 debt maturities was 11.625%.

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  2. "Largest cruise line companies by market cap."

  3. Visible Alpha. "Financial Data."

  4. Royal Caribbean. "Royal Caribbean Group Reports Third Quarter Results, Provides Forward Guidance, and Introduces the ‘Trifecta’ Performance Initiative."

  5. MarketWatch. "Royal Caribbean Stock Drops After Downbeat Outlook Overshadows First Quarterly Profit Post-Pandemic."

  6. Yahoo! Finance. "Royal Caribbean Cruises Ltd. (RCL)."

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