Royal Caribbean Cruises Ltd (RCL) sailed past analyst estimates in the third quarter, reporting a 17.5% year-over-year increase in revenue to $4.89 billion. This outpaced the consensus estimate of $4.90 billion, signaling strong demand for cruising experiences. Passenger ticket revenues, a key indicator of cruise demand, rose 18% year-over-year to $3.47 billion.
The company’s success was further reflected in its operational performance. Total cruise operating expenses rose to $2.391 billion compared to $2.137 billion a year ago. Despite this increase, the company managed to improve its gross margin yields by 13.4% and net yields by 7.9% in constant currency. This demonstrates Royal Caribbean’s effective cost management strategies while maintaining strong customer value.
The third quarter saw impressive operational efficiency with an occupancy rate of 111%, exceeding last year’s 109.7%. This resulted in a significant boost to operating income, which surged 29.2% to $1.634 billion, translating to an impressive operating margin of 33.4%. Adjusted EBITDA for the quarter also soared, reaching $2.148 billion with a margin of 44%, representing a 242 basis point increase.
The positive performance was further amplified by a strong adjusted earnings per share (EPS) of $5.20, surpassing the consensus estimate of $5.03. As of September 30, the group’s customer deposit balance stood at $5.324 billion, signifying strong confidence in future bookings.
Looking ahead, Royal Caribbean is optimistic about its future, fueled by its strategic investments in new destinations and experiences. The company is set to launch Perfect Day Mexico in 2027 and Silversea’s 150-room hotel in Puerto Williams, Chile, in 2025, which will support Antarctic expeditions.
“Our exceptional third-quarter results and increased full year expectations reflect the robust demand for our differentiated vacation experiences,” said Jason Liberty, president and CEO. “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.”
Royal Caribbean’s confidence in its future trajectory is reflected in its raised 2024 outlook. The company now projects adjusted EPS to be between $11.57 and $11.62, up from the previous range of $11.35 to $11.45. This surpasses the consensus estimate of $11.58 and suggests continued growth in the coming year.
In the fourth quarter, Royal Caribbean anticipates net yields to increase between 5.1% and 5.6% in constant currency. The company projects adjusted EPS to be between $1.40 and $1.45, although this falls short of the current consensus estimate of $2.28.
Following the strong third-quarter results, RCL shares were trading higher by 1.41% at $206.39 at the last check on Tuesday. This positive market reaction suggests investor confidence in the company’s continued growth trajectory.
