Strong demand pushes up Royal Caribbean profit and outlook, dividend reinstated

Royal Caribbean also achieved all three of its Trifecta goals 18 months early.

Adjusted net income was $882m, or $3.21 per share, above Wall Street's $2.75 consensus, while US GAAP net income was $854m, or $3.11/share. Approximately 15 cents per share was due to favorable expense timing.

Revenues reached $4.1b, higher than Wall Stret's $4.04b consensus.

Full-year EPS outlook goes to $11.35-$11.45

With strong demand continuing, Royal Caribbean raised its full year adjusted EPS guidance to $11.35 to $11.45, or 68% year over year growth. This is above Wall Street's $11.07 projection,

Dividend reinstated after four years

Royal Caribbean will pay a dividend of 40 cents per share on Oct. 11 to shareholders of record on Sept. 20.

The company halted dividend payments in 2020 as the pandemic set in; they were 78 cents/share then.

'Exceptional demand for our vacation experiences has accelerated our performance by generating significant yield growth over the past several years,' Royal Caribbean Group CEO Jason Liberty said. 'As we look forward, we remain intensely focused on driving strong shareholder returns by delivering a lifetime of vacations and taking a greater share of the rapidly growing $1.9 trillion global vacation market. This is underpinned by our formula for future success — disciplined growth and moderate yield growth while controlling our costs.'

Trifecta

For the 12 months ending June 30, the company achieved all three of its Trifecta goals: triple digit adjusted EBITDA per available passenger cruise day, return on invested capital in the teens and double digit adjusted EPS.

Q2

Second quarter occupancy was 108%. Net yields were up 13.3% in constant currrency and 13.2% as reported. Net cruise costs per APCD excluding fuel increased 5.7% in constant currency and 5.5% as reported.

Adjusted EBITDA was $1.6b.

Bookings update

Royal Caribbean said demand and pricing remained very strong since the April earnings call. Booking volumes were higher than the corresponding period in 2023 and at record pricing levels. The company continues to be in a record booked position for 2024 sailings.

Consumer spending onboard, as well as pre-cruise purchases, continue to significantly exceed 2023 levels driven by greater participation at higher prices.

Europe and Alaska strength

The further increase in yield expectations for the year is the result of higher pricing and onboard revenue expectations across key products, with particular strength in European and Alaskan itineraries.

'We have seen strength for all key products and are already taking more bookings for 2025 sailings than 2024,' Liberty said.

As of June 30, the Group's customer deposit balance was $6.2b.

Q3 EPS forecast $4.90-$5

Third quarter net yields are expected to increase 6.5% to 7% in constant currency and as reported, driven by strong demand for Europe and Alaska cruises and continued strength in onboard revenue. Net cruise costs excluding fuel per APCD are expected to increase 4.7% to 5.2% in constant currency and as reported compared to Q3 2023.

Adjusted EPS is expected in the range of $4.90 to $5, higher than Wall Street's $4.76 projection.

Liquidity

Royal Caribbean's liquidity at the end of June was $3.8b.

'Our accelerated performance and commitment to strengthening the balance sheet have allowed us to reduce both leverage and cost of capital, consistent with our goal of achieving investment grade metrics, and we continue to expect our leverage to be below 3.5x by year end,' CFO Naftali Holtz said. 'Our strong balance sheet allows us to expand capital allocation and reinstate a quarterly dividend, further supporting our goal of creating long-term shareholder value.'

Capex and capacity guidance

Based on current foreign exchange rates, 2024 capital expenditures are expected to be approximately $3.5b, mainly related to newbuilds.

2024 capacity is forecast to increase 8%. Capacity changes for 2025, 2026 and 2027 are expected to be 5%, 7% and 4%, respectively, not counting potential ship sales or other additions.

See also 'Hotels may be seeing price sensitivity but Royal Caribbean is not: Liberty' and 'Icon of the Seas hitting 132% occupancy but there's still room to carry more cruisers'