A month has gone by since the last earnings report for Royal Caribbean (RCL). Shares have lost about 9.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Royal Caribbean due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Royal Caribbean Q4 Earnings Top Estimates, Revenues Miss, Both Up Y/Y
Royal Caribbean reported mixed fourth-quarter 2024 results, with adjusted earnings beating the Zacks Consensus Estimate while the revenues missed the same. Notably, the top and bottom lines increased on a year-over-year basis.
The company’s performance during the quarter was driven by stronger pricing on close-in demand and continued strength in onboard revenues. Its diversified fleet offerings, accompanied by its commercial and vacation experiences, are witnessing robust demand trends amid an improving global market backdrop. Thanks to these tailwinds, RCL could achieve its Trifecta goals before the schedule, pointing out the benefits it is realizing from the current improving scenario.
Meanwhile, higher stock-based compensation expenses, driven by an increase in the company's stock price during the fourth quarter of 2024, along with unfavorable foreign exchange and fuel rates, are headwinds. Nonetheless, its continued focus on executing its strategic initiatives, along with leveraging benefits from the global market trends, is more than offsetting the negative flush.
RCL’s Q4 Earnings & Revenues
For the fourth quarter, the company reported adjusted earnings per share (EPS) of $1.63, which beat the Zacks Consensus Estimate of $1.50 by 8.7%. In the prior-year quarter, RCL recorded an adjusted EPS of $1.25.
Quarterly revenues of $3.76 billion marginally missed the consensus mark of $3.77 billion by 0.3%. However, the reported value was up 12.9% year over year from $3.33 billion. On a constant currency (cc) basis, total revenues were $3.771 billion.
Royal Caribbean’s Quarterly Highlights
Passenger ticket revenues amounted to $2.60 billion, up from $2.29 billion in the prior-year quarter. Our estimate for Passenger ticket revenues was $2.51 billion.
Onboard and other revenues increased to $1.16 billion from $1.05 billion reported in the year-ago quarter. Our estimate for the metric was $1.20 billion.
Total cruise operating expenses amounted to $2.05 billion, up 8.6% year over year. Our estimate for the metric was $2.18 billion.
Net yields rose 7.3% on a cc basis and 7% on a reported basis compared with the fourth-quarter 2023 level. Net cruise costs, excluding fuel, per Available Passenger Cruise Day (APCD) rose 13.5% on a cc basis and 13.4% on a reported basis from last year quarter’s figure.
Sneak Peek at RCL’s 2024 Results
Royal Caribbean reported total revenues of $16.48 billion in 2024, up from $13.9 billion in 2023. Adjusted EPS also increased year over year to $11.80 from $6.77.
Total cruise operating expenses during the year increased notably to $8.65 billion from $7.78 billion reported a year ago.
Net yields rose 11.6% on a cc basis and 11.5% on a reported basis compared with the 2023 level. Net cruise costs, excluding fuel, per APCD rose 6.8% on cc and reported basis compared with 2023.
Other Financial Information of RCL
As of Dec. 31, 2024, Royal Caribbean reported cash and cash equivalents of $388 million compared with $497 million in 2023-end. As of the end of the fourth quarter of 2024, long-term debt decreased to $18.47 billion from $19.73 billion as of 2023-end. The current portion of long-term debt at the end of the quarter was $1.6 billion, down from $1.72 billion in 2023-end.
Booking Update of Royal Caribbean
During the fourth quarter, the company witnessed increasing trends in its vacation experiences thanks to the favorable demand and pricing environment. Notably, close-in demand was robust on a rate and volume basis, with guest onboard spending and pre-cruise purchases continuing to exceed prior years, driven by greater participation at higher prices, due to RCL’s robust commercial engine.
The company is highly optimistic about the demand and pricing landscape for 2025. Its new ships, existing fleet and private destinations have received a strong market response, paving the way for yield growth in 2025.
As of Dec. 31, 2024, RCL had $5.5 billion in customer deposits compared with $5.31 billion in the prior-year period.
RCL’s Q1 Outlook
In the first quarter of 2025, Royal Caribbean expects depreciation and amortization expenses to be in the range of $410-$420 million. Net interest expenses (excluding loss on extinguishment of debt) are projected to be between $230 million and $240 million. Management estimates adjusted EPS to be in the band of $2.43-$2.53 (compared with $1.77 reported a year ago).
The company expects net yields to increase in the band of 3.9-4.4% on a reported basis and 4.75-5.25% at cc on a year-over-year basis. Net cruise costs, excluding fuel, per APCD are expected to increase between 1.3% and 1.8% on a reported basis and between 1.6% and 2.1% at cc.
2025 View by RCL
For 2025, the company expects depreciation and amortization expenses to be in the range of $1.715-$1.725 billion. Net interest expenses (excluding loss on extinguishment of debt) are expected to be within $935 -$945 million. Adjusted EPS is anticipated to be between $14.35 and $14.65.
The company expects net yields to increase in the band of 1.8-3.8% on a reported basis and 2.5-4.5% at cc on a year-over-year basis.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 8.88% due to these changes.
VGM Scores
Currently, Royal Caribbean has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Royal Caribbean has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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