Royal Caribbean May Have Swung Back to Loss in Fourth Quarter

Cruise industry demand is picking up, but inflation and other headwinds remain

By
Nathan Reiff
Full Bio
Nathan Reiff has been writing expert articles and news about financial topics such as investing and trading, cryptocurrency, ETFs, and alternative investments on Investopedia since 2016.
Learn about our editorial policies
Published February 03, 2023
Grandeur of the Seas at sea

Courtesy of Royal Caribbean

Key Takeaways

  • Royal Caribbean will likely post fourth-quarter 2022 adjusted EPS of -$1.37 vs. -$5.33 for the prior-year quarter.
  • Revenue is expected to more than double to $2.6 billion.
  • The company faces lingering debt from when it suspended operations earlier in the pandemic.
  • Booking rates have increased, but concerns about inflation and a possible recession, as well as COVID, remain.

Royal Caribbean Group (RCL), the second-largest cruise company by 2021 revenue, is expected to return to a loss in the final quarter of 2022 after posting its first profit in several years in the third quarter, even as revenues almost triple amid rebounding cruise demand.

The cruise line likely will say that net losses reached $355.8 million, for adjusted losses of $1.37 per share, according to estimates compiled by Visible Alpha. Both are narrower than the prior-year quarter. Revenue could increase 165% to $2.6 billion. Royal Caribbean reports results for the fourth quarter before markets open on Feb. 7.

Cruise companies, hit hard by COVID shutdowns, have recently noted an uptick in bookings on smaller luxury vessels as most ports worldwide have reopened. While hesitation due to inflation and a potential recession linger, Morgan Stanley has said reservation patterns industry-wide are returning to pre-pandemic norms, including longer booking windows. Still, passenger concerns about COVID remain a headwind after a number of high-profile outbreaks on cruise lines in years past.

As the industry rebounds, Royal Caribbean has said it is well-positioned, with bookings for 2023 so far coming in at historic ranges and prices. Nonetheless, the company does have to contend with a debt load that swelled to $23 billion when it suspended operations early in the pandemic. Royal Caribbean recorded $352 million in interest expenses for the third quarter and it expects a similar figure in the last months of the year.

Royal Caribbean shares have rallied since last summer. They are down about 14% over the last year, compared with a 16% drop for the S&P 500 Consumer Discretionary Index.

One-Year Total Return for S&P 500 Consumer Discretionary Index and Royal Caribbean
Source: TradingView.
Royal Caribbean Key Stats
  Estimate for Q4 FY 2022 Actual for Q4 FY 2021 Actual for Q4 FY 2020
Adjusted Earnings Per Share ($) -1.37 -5.33 -6.09
Revenue ($B) 2.6 1.0 0.03

Source: Visible Alpha

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

  1. Visible Alpha. "Financial Data."

  2. Royal Caribbean Group. "Royal Caribbean Group to hold conference call on business update, fourth quarter and full year 2022 financial results."

  3. CNBC. "This could be a ‘banner year’ for cruise stocks. Why Citi says it’s time to reconsider the industry as a long-term trade."

  4. CNN. "Cruise ship with 800 Covid-positive passengers docks in Sydney."

  5. Investing.com. "Royal Caribbean 'the superior cruise operator' - Morgan Stanley."

  6. Bloomberg. "Royal Caribbean Pays More Than 11% on Bond to Refinance Debt."

  7. Royal Caribbean Group. "Royal Caribbean Group Reports Second Quarter 2022 Results, Highlighted by the Return of Its Full Fleet Back to Service and Positive Operating Cash Flow," Page 2.

  8. Royal Caribbean Group. "ROYAL CARIBBEAN GROUP REPORTS THIRD QUARTER RESULTS, PROVIDES FORWARD GUIDANCE, AND INTRODUCES THE "TRIFECTA" PERFORMANCE INITIATIVE."

Take the Next Step to Invest
×
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
Service
Name
Description