Royal Caribbean Earnings: Sailing Toward Further Profit Growth Bolstered by Robust Demand

Narrow-moat Royal Caribbean continues to show momentum in demand, as the launches of Icon of the Seas, Celebrity Ascent, and Silver Nova have created a halo around the brand. Appetite for Royal’s offerings have been unfettered despite consumer caution across numerous spending categories, leading Royal to capture five of the best booking weeks ever since the end of October. This has generated a record booked position in rate and volume, which has provided a whopping $5.3 billion in customer deposits (up from $4.2 billion last year). Although we suspect this helped the fourth quarter impress from a profitability perspective, it has already led to a 2024 outlook that is nothing short of spectacular. Indeed, the firm expects as reported yield growth of 5.3%-7.3% and net cruise cost growth of 2%-2.5%, both better than our 4.5% and 5% respective preprint estimates. This should lead to EPS of around $9.60, above our $9.16 prior estimate, more than 40% higher than 2023 and ahead of 2019’s level despite more than $800 million in higher projected debt service costs, with an EBITDA margin outpacing prepandemic marks.