Wm. Blair sees strong demand buffering fuel costs in Royal's Q3

Royal Caribbean is scheduled to report Q3 earnings Oct. 26.

In a note William Blair analyst Sharon Zackfia forecast Royal Caribbean will post its best quarter since 2019 — again — with constant-currency net yields in the mid-30% range on strong pricing and on-board spending, translating to a 14% increase versus 2019, at the high end of guidance.

As a result, the brokerage expects earnings per share will be near the higher end of guidance despite rising bunker prices and a stronger dollar. In late July, Royal Caribbean estimated Q3 EPS in a range of $3.38 to $3.48.

Fourth quarter

Zackfia said pricing checks suggest demand trends remain strong, and she expects Royal Caribbean to reiterate guidance for a low-teens constant-currency net yield improvement in Q4 compared to 2019. William Blair's projection is for a 14% increase.

So for Q4, Zackfia expects Royal Caribbean's guidance to encompass William Blair's and the consensus expectation for a mid-20% increase in constant-currency net yields versus last year, with EPS guidance bracketing the brokerage's estimate of $1.03 and consensus of $1.04.

Full-year guidance

'We also expect full-year guidance to be reiterated notwithstanding the moves in fuel and currency,' Zackfia said. In July, Royal Caribbean estimated full-year EPS in a range of $6 to $6.20.

William Blair rates Royal Caribbean 'outperform' (buy).

RCL shares closed at $86.70 Monday, up 59 cents.