Royal Caribbean is the IBD Stock Of The Day for Tuesday. RCL stock reversed to clear a follow-on entry opportunity after the cruise giant reported Q3 results and raised its outlook.
Royal Caribbean on Tuesday reported a 35% increase in earnings to $5.20 per share adjusted, which beat FactSet expectations of $5.04 per share. Revenue increased 17.5% to $4.89 billion, just below analyst views.
The company's occupancy rate, or load factor, rose to 111% for the quarter, up from 108% in Q2 and about 110% last year, respectively.
Passenger ticket revenues increased 18% to $3.47 billion, while onboard and other revenues rose 16% to about $1.42 billion.
Royal Caribbean said the demand and pricing environment has accelerated since its last earnings report and has exceeded expectations. Meanwhile, onboard consumer spending continues to "significantly" outpace 2023 levels, driven by higher participation at higher prices. The company noted that demand for 2025 remains "strong," with its booked load factors in line with prior years at higher rates. That should allow for further pricing and yield growth as 2025 bookings ramp up, Royal Caribbean said in the news release.
Royal Caribbean Lifts Outlook
Royal Caribbean guided Q4 earnings between $1.40 and $1.45 per share adjusted, compared to $1.25 per share last year. Analysts expect earnings of $1.57 per share adjusted.
For the year, Royal Caribbean expects adjusted earnings to increase 71% to range from $11.57 to $11.62 per share, with the midpoint ahead of FactSet views for $11.58 per share. Royal Caribbean previously expected earnings of $11.35 to $11.45 per share. The cruise operator guided net cruise costs to increase in a range from 6.2% to 6.7%, up from prior guidance due to higher stock-based compensation.
The midpoint of Royal Caribbean's 2024 net yield forecast of 10.8% to 11.3% growth was short of analyst views for an 11.3% increase.
CEO Jason Liberty said in the release he anticipates 2025 earnings "to start with a $14 handle."
William Blair analyst Sharon Zackfia noted that Q3 upside and business momentum prompted Royal Caribbean to hike its 2024 guidance for the fourth time this year. The firm estimates Royal Caribbean could deliver "healthy" 20% EPS growth or more in 2025. Zackfia wrote that Royal "has evolved into a more consistent, high-return business." William Blair maintained an outperform rating on the shares.
JPMorgan lifted its price target on Royal Caribbean stock after the beat-and-raise report, noting Royal Caribbean earnings could reach $14.55 to $15 per share in 2025, The Fly reported. The firm raised its price target on RCL stock to 243 from 213 and kept a buy rating on shares.
Royal Caribbean Stock
RCL stock surged 4% Tuesday to clear a small shelf pattern. Investors could use the move to add to their positions or as an aggressive buying opportunity.
However, the current pattern is higher risk than traditional base buy points.
SwingTrader added RCL shares with a 3/4 position on Tuesday at a 208.61 entry.
Royal Caribbean shares have run up nearly 22% from their cup-with-handle breakout in mid-September. RCL stock has rallied 59% in 2024.
Carnival stock ticked lower Tuesday. Norwegian Cruise Line eased slightly.
Viking Holdings inched up a fraction. Shares are trading near the top of a buy zone for a consolidation after breaking out in early October.
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