Royal Caribbean beats Q1 forecasts, lifts guidance on strong demand

Shares rose in pre-market-open trading.

First quarter

Adjusted Q1 net income of $478m, or $1.77/share, beat the $1.33 consensus expectation and was up from the year-ago loss of $59m, or 23 cents/share. US GAAP net income was $360m, or $1.35/share.

Adjusted EBITDA was $1.2b and operating cash flow $1.3b. Total revenues were $3.7b, in line with Wall Street's expectation.

Occupancy was 107%, up 5 points from a year ago. Net yields rose 19.3% in constant currency and 19.5% as reported.

Net cruise costs, excluding fuel, per available passenger cruise day (APCD) increased 4.1% in constant currency and 4.2% as reported, better than guidance due to 325 basis points from favorable timing of expenses.

'Wow, what a great start!'

'Wow, what a great start to the year!' Royal Caribbean Group President/CEO Jason Liberty said. Demand 'continues to be very robust, resulting in outperformance in the first quarter, a further increase of full year earnings guidance and 60% expected earnings growth year over year.'

Liberty reiterated the company expects to achieve all its Trifecta financial goals in 2024, one year earlier than the original target. Those are reaching triple-digit adjusted EBITDA per APCD, double-digit adjusted EPS and return on invested capital in the teens — all topping 2019.

Full-year outlook

Stronger than anticipated demand led to a record wave season and continued strength in bookings in April in both volume and pricing. This robust booking environment across all key itineraries coupled with continued strength in onboard spending led to the higher Q1 revenue versus guidance and further improvement in full-year yield expectations.

2024 net yields are projected to rise 9% to 10% in constant currency and as reported. Net cruise costs, excluding fuel, per APCD are expected to increase approximately 5.5% in in constant currency and 5.4% as reported, including 310 basis points of costs related to more dry dock days and the new Hideaway Beach at Perfect Day at CocoCay.

Approximately one-third of the increase in unit costs, compared to prior guidance, is related to lower APCDs due to canceled Red Sea sailings with the remainder driven by higher stock-based compensation.

Second increase in EPS guidance

It was the second time Royal Caribbean raised its full-year profit forecast. Initial February guidance was for a range of $9.50 to $9.70 that went up, three weeks later, to $9.90 to $10.10.

Now adjusted EPS is expected to grow 60% year-over-year to the $10.70 to $10.90 range, including a 10-cent headwind related to a stronger dollar and high fuel prices. Approximately one-third of the increase is due to Q1's outperformance with the remainder mainly driven by a better business outlook and lower interest expense but also higher stock-based compensation.

Record booked position

Royal Caribbean continues to be in a record booked position, with rates for 2024 cruises even further ahead of 2023 than they were at the beginning of the year. In addition to record ticket pricing, onboard spending and pre-cruise purchases continue to exceed prior years. More people are buying, and they're spending more, the company said.

As of March 31 the customer deposit balance was $6b.

Second quarter

Q2 adjusted EPS is forecast in the range of $2.65 to $2.75, with net yields expected to increase 10.2% to 10.7% in constant currency and 10% to 10.5% as reported.

Net cruise costs, excluding fuel, per APCD are expected to be up 7.4% to 7.9% in constant currency and 7.2% to 7.7% as reported compared to 2023 and include increased dry dock days, Hideaway Beach operations and the timing of costs shifted from Q1.

Liquidity, capex and capacity growth

At March 31, liquidity was $3.7b, including cash and cash equivalents and undrawn revolving credit facility capacity.

During the quarter, Standard & Poors upgraded the company's rating to BB+ with a stable outlook and Moody's lifted its credit rating to Ba2 with a positive outlook.

Capital expenditures for full year 2024 are expected to be approximately $3.4b, mainly for the deliveries of Utopia of the Seas and Silver Ray. Non-new ship-related capital expenditures are expected to be $0.7b.

Capacity will be up 8.1% compared to 2023. Capacity growth for 2025, 2026 and 2027 is expected to be 5%, 6%, and 4%, respectively.

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