MW Royal Caribbean CEO: Americans are 'wealthier than ever' and love to travel
By Tomi Kilgore
Cruise operator beats profit expectations and the full-year guidance was raised, but the outlook for the current quarter disappoints
Shares of Royal Caribbean Cruises Ltd. swung higher Tuesday toward another record close, after the cruise operator beat third-quarter earnings expectations and raised the full-year outlook, as bookings for future cruises continued to increase.
And while revenue continued to rise amid stronger pricing and continued "strong" and "quality" demand, it came up a touch shy of expectations as passenger ticket revenue missed, to offset a beat by onboard and other revenue.
The company also raised its full-year guidance for adjusted profit and net yields, and gave an early upbeat outlook for 2025, but the profit outlook for the current quarter was below Wall Street estimates.
"American households are wealthier than ever, with continued wage growth and low unemployment driving strong consumer spending, spend on leisure has grown a lot faster than most other spend categories over the past 12 months, with spend on travel increasing at a faster pace than other leisure categories," said Chief Executive Jason Liberty on the post-earnings call with analysts, according to a FactSet transcript.
"Our research suggests that this trend will continue over the next 12 months, with leisure travel spending growing by more than any other leisure category," Liberty added.
Read: Royal Caribbean CEO explains why cruises are so popular.
The stock $(RCL)$ had initially dropped in the premarket after the results were reported, then jumped into the green as the opening bell rang. The stock was up 2.5% in morning trading, to put it on track to close at a record for the second-straight session.
For the quarter to Sept. 30, net income rose to $1.11 billion, or $4.21 a share, from $1.01 billion, or $3.65 a share, in the same period a year ago.
Excluding nonrecurring items, adjusted earnings per share of $5.20 beat the FactSet consensus of $5.04.
Total revenue grew 17.5% to $4.886 billion, just shy of the FactSet consensus of $4.892 billion.
Passenger-ticket revenue increased 18% to $3.471 billion, just below the FactSet consensus of $3.514 billion, while onboard and other revenue rose 16.1% to $1.415 billion to beat expectations of $1.371 billion.
Passenger cruise days were up 12.3% to 14.8 million, in line with the FactSet consensus, while occupancy improved to 111% from 109.7% to top expectations of 110.8%.
The company said higher load factors resulted from closer-in demand that exceeded expectations. and Consumer spending onboard the cruise ships continued to "significantly exceed" 2023 levels due to greater participation at higher prices.
Looking ahead, the company expects adjusted EPS for the fourth quarter of $1.40 to $1.45, which is below the current FactSet consensus of $1.58. Included in the company's EPS guidance is 24 cents in headwinds, of which about one-third is related to Hurricane Milton, with the rest driven by the timing of costs that shifted from the third quarter and higher non-cash stock compensation.
But for the full-year, the company raised its guidance range for adjusted EPS to $11.57 to 11.62 from $11.35 to $11.45.
"We are very pleased with how demand is shaping up for 2025, with bookings outpacing 2024 levels during the third quarter and into October," CEO Liberty said.
And for 2025, while it was still "very early in the planning process," he said EPS is expected to a have a "$14 handle." The current FactSet consensus for 2025 EPS is $13.68.
"Our addressable market is growing and we are attracting more new customers into our vacation ecosystem, particularly younger demographics," Liberty said. "In fact, the majority of our guests this year are either new to cruise or new to brand, while at the same time our loyalty guests are up 20% compared to last year."
The stock has rocketed 152.6% over the past 12 months, while the S&P 500 index has rallied 41.6%.
-Tomi Kilgore
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(END) Dow Jones Newswires
October 29, 2024 11:12 ET (15:12 GMT)
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