Royal Caribbean posts solid third quarter but more cautious outlook

(Sharecast News) - Shares in Miami-based cruise operator Royal Caribbean were sliding in early trading on Tuesday, even after it reported adjusted third-quarter earnings per share of $5.20, surpassing analyst expectations of $5.04. The company said the growth was supported by strong pricing, demand, and onboard revenue.

Revenue for the quarter reached $4.89bn, making for a 17.4% year-on-year increase, aligning with analyst estimates.

Gross margin rose to 51.1%, and the operating margin improved to 33.4%, reflecting the company's ability to capitalise on a high-demand environment, especially for European and Alaskan itineraries.

Load factors reached 111%, indicating near-full capacity utilisation.

Despite strong quarterly performance, Royal Caribbean's stock fell on the back of more cautious fourth-quarter guidance.

The firm projected earnings per share of $1.40 to $1.45 in the final quarter of the year, below the $1.57 analysts had anticipated, attributing the shortfall to a 24 cents-per-share impact from Hurricane Milton, deferred costs from the third quarter, and increased stock compensation expenses.

Nevertheless, management raised its full-year earnings per share forecast to a range of $11.57 to $11.62, driven by high demand and pricing strength, and said it expected 2025 earnings per share to exceed $14.

The company also announced plans to expand its private destination offerings, including 'Perfect Day Mexico' set for 2027, enhancing its appeal in a competitive market.

It said demand remained strong into 2025, with higher rates for forward bookings, reinforcing its positive outlook.

"Our exceptional third quarter results and increased full year expectations reflect the robust demand for our differentiated vacation experiences," said president and chief executive officer Jason Liberty.

"We see elevated demand patterns continuing as we build the business for 2025, and although the yield comparable will be a high bar, our proven formula of moderate capacity growth, moderate yield growth and strong cost discipline is expected to continue to deliver strong financial results.

"While we are still very early in the planning process, we anticipate earnings per share in 2025 to start with a $14 handle."

At 0857 EDT (1257 GMT), shares in Royal Caribbean Cruises were down 2.74% in New York at $197.94.

Reporting by Josh White for Sharecast.com.