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Royal Caribbean reports third-quarter earnings and raises expectations – Cruise Industry News

Posted on by Pranco
Royal Caribbean reports third-quarter earnings and raises expectations – Cruise Industry News

Royal Caribbean Group reported third-quarter earnings per share (“EPS”) of $4.21 and adjusted earnings per share of $5.20.

According to the company, these results exceeded company expectations due to stronger pricing on tight demand, continued strong onboard revenues and lower costs due to timing. Furthermore, the balance sheet measures taken in the third quarter resulted in lower interest expenses and the company’s return to its pre-Covid unsecured balance sheet.

The company raises its full-year 2024 adjusted earnings per share to $11.57 – $11.62. The increase in earnings expectations is driven by the strong revenue performance in the third quarter and an increase in price expectations for the fourth quarter. Adjusted Q4 EPS guidance of $1.40 – $1.45 includes $0.24 of headwinds – a third related to Hurricane Milton, with the remainder driven by the timing of cost shifts from Q3, and higher non-cash stock compensation.

“Our exceptional third quarter results and higher full-year expectations reflect robust demand for our differentiated vacation experiences,” said Jason Liberty, president and CEO of Royal Caribbean Group. “We see elevated demand patterns continuing as we build the business for 2025, and while comparable revenues will be a high bar, our proven formula of moderate capacity growth, moderate top-line 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 expect earnings per share to start at $14 in 2025.”

Third quarter 2024:

  • The occupancy rate in the third quarter was 111%.
  • Gross margin returns increased by 13.4% as reported. Net returns increased 7.9% in constant currency and as reported.
  • Gross cruise costs per available passenger cruise days (“APCD”) increased by 1.3% as reported. Net cruise costs (“NCC”), excluding fuel, per APCD increased 4.0% in constant currency and as reported.
  • Total revenue was $4.9 billion, net income $1.1 billion or $4.21 per share, adjusted net income $1.4 billion or $5.20 per share, and adjusted EBITDA $2.1 billion.

Full year 2024 outlook:

  • Net returns are expected to rise 10.8% to 11.3% in constant currency (10.9% to 11.4% as reported).
  • NCC, excluding Fuel, is expected to rise approximately 6.2% to 6.7% in constant currency and as reported, according to APCD. The increase in costs, compared to previous expectations, is driven by higher share-based compensation.
  • Adjusted earnings per share are expected to grow 71% year over year and range between $11.57 and $11.62.

Third quarter results 2024

Net income for the third quarter of 2024 was $1.1 billion or $4.21 per share, compared to net income of $1.0 billion or $3.65 per share for the same period last year. Adjusted net income was $1.4 billion or $5.20 per share for the third quarter of 2024, compared to adjusted net income of $1.1 billion or $3.85 per share for the same period last year. The company also reported total revenue of $4.9 billion and adjusted EBITDA of $2.1 billion.

Gross margin returns increased 13.4% as reported, and net returns increased 7.9% in constant currency (and as reported), compared to the third quarter of 2023. Occupancy for the quarter was 111%. Net revenue growth exceeded the company’s expectations, primarily due to higher prices for key products, with particular strength for European and Alaska routes, and improved onboard revenues.

Gross cruise costs per APCD increased 1.3% as reported, compared to Q3 2023. NCC, excluding fuel, per APCD increased 4.0% in constant currency (and as reported), compared to Q3 of 2023, and includes the benefit of costs shifting to the fourth quarter.

Royal Caribbean Group continues to deliver the best vacation experience through innovative new ships and exciting private destinations. This quarter, the company announced its plans to expand its portfolio of private destinations with Perfect Day Mexico, expected to open in 2027. The company also announced Silversea’s new 150-room hotel in Puerto Williams, Chile, to deliver an even better and seamless guest experience. for its Antarctica expeditions, which are expected to open in 2025. These new experiences complement the Royal Beach Club Paradise Island, expected to open in 2025, and the Royal Beach Club Cozumel, expected to open in 2026.

“We wake up every day with an obsessive focus on our mission to provide our guests with the very best vacation experiences for a lifetime. In pursuit of that mission, we are very excited to further expand our Perfect Day collection with Perfect Day Mexico and develop the southernmost hotel in the world,” said Jason Liberty, president and CEO of Royal Caribbean Group. “Along with the expansion of our Icon Class, we want to continue to change the game and position ourselves to win a bigger share of the $1.9 trillion vacation industry.”

Update on bookings and income on board

The demand and pricing environment has accelerated since the last earnings call, surpassing 2023 levels. Increasing demand for 2024 sailings exceeded expectations, contributing to higher occupancy rates at higher prices and higher onboard revenues for the third quarter. Onboard consumer spending, as well as pre-cruise purchases, remain significantly higher than 2023 levels, driven by increased participation at higher prices.

The market response to the company’s new vessels, existing hardware and private destinations has been excellent and accelerating – further positioning the company for return growth in 2025. Demand for 2025 is strong, with booked occupancy factors in line with previous years and at higher rates, allowing further price and yield growth as bookings for 2025 continue to rise.

“Our business performance remains robust, driven by strong demand and excellent operational execution,” said Naftali Holtz, Chief Financial Officer of Royal Caribbean Group. “Our strong booked position is exactly where we want to be to further optimize our return profile and deliver on our success formula – moderate capacity growth, moderate yield growth and strong cost discipline – positioning us to continue delivering margin expansion and strong financial returns. .”

Fourth quarter 2024

Net returns are expected to increase 5.1% to 5.6% in constant currency and 5.3% to 5.8% as reported, compared to the same period last year. The expected revenue growth is driven by strong demand for Caribbean itineraries and the continued strength of onboard revenues. Net return expectations for the fourth quarter include a negative impact of approximately 40 basis points from Hurricane Milton. The expected yield growth in the fourth quarter is in addition to the 17.9% growth in net returns in constant currency in the fourth quarter of 2023 compared to the same period in 2019.

NCC, excluding Fuel, is expected to rise 11.6% to 12.1% in constant currency and 11.7% to 12.2% as reported, compared to the same period last year, according to APCD. The year-over-year increase is mainly driven by an increase in the number of dry dock days, non-cash equity compensation and cost shifting from the third quarter onwards.

Based on current fuel prices, interest rates, foreign exchange rates and the factors described above, the company expects fourth quarter adjusted earnings per share to be in the range of $1.40 to $1.45.