Key Takeaways RCL posted mixed Q3 results with EPS beating estimates and revenues coming in slightly below expectations.Strong bookings, higher capacity and solid onboard spending supported RCL's year-over-year growth.Rising costs, fuel expenses and increased dry dock activity pose near-term pressure for RCL.Royal Caribbean Cruises Ltd. (RCL) reported mixed third-quarter 2025 results on Oct. 28, with adjusted EPS surpassing expectations and revenues coming in slightly below. The company posted year-over-yea ...

Core Insights - Royal Caribbean Cruises Ltd. (RCL) is experiencing strong demand across its vacation offerings, with record booked load factors for 2025 and 2026, driven by higher pricing and robust consumer interest [1][8] - The company is seeing a trend of increased bookings through digital channels, indicating a more engaged guest base and supporting ongoing yield performance [1][8] - The positive booking momentum is expected to sustain the company's growth trajectory, supported by strong pricing and consumer sentiment [3] Company Performance - RCL reported record booked load factors for both 2025 and 2026, with bookings accelerating and rate growth at the high end of historical ranges [1][8] - The company highlighted strong interest in new offerings such as Star of the Seas and Celebrity River, which are designed to attract both repeat and new guests [2] - RCL's shares have gained 4.8% over the past six months, contrasting with a 0.5% decline in the industry [6] Financial Estimates - The Zacks Consensus Estimate for RCL's earnings implies a year-over-year increase of 32.5% for 2025 and 14.6% for 2026, with EPS estimates for 2025 having risen in the past 60 days [10] - RCL currently trades at a forward price-to-earnings ratio of 15.02X, which is below the industry average of 16.32X, indicating potential valuation upside [14] Industry Context - Other industry players like Norwegian Cruise Line Holdings (NCLH) and Carnival Corporation are also experiencing solid demand trends, with Norwegian focusing on premium experiences and Carnival benefiting from strong bookings and pricing [4][5] - The overall industry is seeing improved guest engagement and higher onboard spending, contributing to a positive outlook for cruise operators [4][5]

Core Insights - Royal Caribbean has announced a new lineup of Caribbean vacations for 2027-28, featuring 2- to 8-night getaways from Florida homeports, including Port Canaveral, Miami, and Tampa [1][3]. Group 1: New Offerings - The Star of the Seas will offer 7-night Eastern and Western Caribbean adventures from Port Canaveral, with stops at the popular Perfect Day at CocoCay in The Bahamas [2]. - Utopia of the Seas will provide short getaways of 3- and 4-nights, visiting Perfect Day at CocoCay and Royal Beach Club Paradise Island [6]. - Harmony of the Seas will operate 7-night adventures to destinations like St. Thomas, St. Maarten, and Jamaica, following its amplification in 2026 [6]. Group 2: Destinations and Experiences - Royal Caribbean is returning to Samaná, Dominican Republic, offering activities such as hiking and whale watching [3]. - New beach experiences will be available at Royal Beach Club Paradise Island in Nassau and Royal Beach Club Cozumel in Mexico, with the latter set to debut in 2026 [3][5]. - The cruise line's top-rated destination, Perfect Day at CocoCay, continues to be a highlight of the offerings [8]. Group 3: Booking and Loyalty - Crown & Anchor Society loyalty members can book these new vacations starting now, ahead of the official opening on November 5 [1].

Core Insights - The company reported strong third-quarter results, exceeding expectations due to high demand and lower costs, with a 7% year-over-year increase in vacation deliveries and an 11% rise in adjusted earnings per share [1][19] - The company aims to expand its exclusive land-based destination portfolio significantly by 2028, reflecting a commitment to enhancing customer experiences and driving long-term shareholder value [2][3] - The company is well-positioned to capture growth in the $2 trillion vacation market, supported by a robust pipeline of strategic initiatives and a strong balance sheet [3][6] Financial Performance - In Q3, net yield grew by 2.4%, with adjusted earnings per share reaching $5.75, an 11% increase from the previous year [1][19] - The company expects a 10% capacity increase in Q4 and anticipates total revenue growth of approximately 13% year-over-year [4][19] - Full-year net yield is projected to grow between 3.5% and 4%, with adjusted earnings per share expected to be in the range of $15.58 to $15.63, reflecting a 32% year-over-year growth [5][23] Strategic Initiatives - The company plans to introduce new exclusive destinations, including the Royal Beach Club Santorini, enhancing the guest experience and brand reach [3][14] - The introduction of Celebrity River has seen strong demand, with initial bookings selling out quickly, indicating a successful expansion into the river cruise segment [10][11] - The company is focused on leveraging technology and AI to enhance customer engagement and operational efficiency, with a significant increase in pre-cruise onboard revenue bookings [15][19] Market Outlook - Consumer sentiment towards travel remains positive, with approximately 75% of consumers planning to spend the same or more on vacations in the next year [8][18] - The Caribbean market continues to perform well, with expected yield growth of 37% compared to 2019, despite increased supply in the region [21][56] - The company anticipates a strong demand environment for 2026, with bookings showing growth at the high end of historical ranges [27][50] Cost Management - The company maintains a disciplined approach to cost management, with expectations for net cruise costs excluding fuel to decline by approximately 0.1% for the full year [22][23] - Operating cash flow is projected to reach nearly $6 billion for the year, supporting ongoing investments and capital returns to shareholders [6][30] - The company has a strong liquidity position, ending the quarter with $6.8 billion in liquidity and a commitment to maintaining investment-grade balance sheet metrics [30][31]

Group 1 - The stock price of Royal Caribbean Cruises (RCL.US) fell over 8% to $294.6 despite better-than-expected Q3 earnings and an upward revision of annual guidance, as revenue and outlook for the next quarter and new fiscal year fell short of market expectations [1] - Carnival Corporation (CCL.US) dropped over 4.7%, Norwegian Cruise Line (NCLH.US) fell over 4.8%, and Viking Holdings (VIK.US) decreased over 2.5% due to the decline in Royal Caribbean's stock [1] - In Q3, key operational metrics improved with passenger capacity, number of passengers, and average cruise days increasing year-over-year; total revenue grew 4.3% to $5.14 billion, slightly below market consensus of $5.17 billion [1] Group 2 - The company reported a Q3 EPS of $5.75, an 11% year-over-year increase, and adjusted EBITDA of $2.3 billion, a 7% increase year-over-year, benefiting from controlled labor, dining, and fuel costs [1] - Ending liquidity was $6.8 billion, a slight decrease from $7.1 billion in the previous quarter, sufficient to cover upcoming debt obligations; however, due to increased debt, the annual interest expense guidance was raised from $930-940 million to $945-955 million [1] Group 3 - For Q4, Royal Caribbean expects a 10.3% increase in capacity driven by the delivery of the "Star of the Seas" and the inaugural sailing of "Celebrity Xcel," while costs are anticipated to decrease by 5.7%-6.2% year-over-year [2] - The company projects adjusted Q4 EPS of $2.74–$2.79, nearly doubling from last year but below market estimates of $2.90 [2] - Annual earnings guidance was raised to $15.58–$15.63 (previously $15.41–$15.55), still below market expectations of $15.69; CEO Jason Liberty expressed confidence in strong bookings for 2026 and beyond, forecasting EPS over $17 for that year, although market consensus for 2026 is higher at over $18.21 [2]

Core Viewpoint - Royal Caribbean's stock price fell over 8% despite better-than-expected Q3 earnings and an upward revision of annual guidance, primarily due to revenue and outlook for the next quarter and new fiscal year falling short of market expectations [1][2] Group 1: Q3 Performance - Royal Caribbean reported a 4.3% increase in total revenue to $5.14 billion, slightly below market consensus of $5.17 billion [1] - Key operational metrics improved, with passenger capacity, number of passengers, and average cruise days all rising compared to last year [1] - Earnings per share (EPS) for the quarter increased to $5.75, an 11% year-over-year growth, exceeding market expectations by $0.07 [1] - Adjusted EBITDA reached $2.3 billion, a 7% year-over-year increase [1] - Liquidity at the end of the quarter was $6.8 billion, down from $7.1 billion in the previous quarter, but sufficient to cover upcoming debt obligations [1] - The company raised its full-year interest expense guidance from $930-940 million to $945-955 million due to increased debt [1] Group 2: Q4 and Future Outlook - For Q4, Royal Caribbean expects a 10.3% increase in capacity driven by the delivery of the "Star of the Seas" and the inaugural sailing of "Celebrity Xcel" [2] - The company anticipates a year-over-year cost reduction of 5.7%-6.2% [2] - Adjusted EPS for Q4 is projected to be between $2.74 and $2.79, nearly doubling from last year but below market estimates of $2.90 [2] - Full-year earnings guidance has been raised to $15.58-$15.63, up from $15.41-$15.55, but still below market expectations of $15.69 [2] - CEO Jason Liberty expressed confidence in strong booking trends, projecting EPS of over $17 for 2026, although market consensus for 2026 is higher at over $18.21 [2]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $5.75 for Q3 2025, an 11% increase year over year [10][25] - Net yields grew by 2.4% year over year, driven by strong demand across all key itineraries [10][23] - Full year adjusted earnings per share is now expected to be in the range of $15.58 to $15.63, reflecting a 32% year over year growth [12][29] Business Line Data and Key Metrics Changes - Capacity increased by 3% in Q3 2025, with nearly 2,500,000 vacations delivered, marking a 7% increase year over year [10][24] - The Caribbean represents 57% of the company's deployment for the year, with a 6% increase in capacity [26] - The company anticipates a 10% capacity growth in Q4 2025, driven by new ships and additional APCDs [11][26] Market Data and Key Metrics Changes - Book load factors for 2026 remain well within historical ranges at record rates, with booked APD growth at the high end of historical ranges [16][32] - The company expects Caribbean yields in Q4 to be up 37% compared to 2019 [26] - Europe is expected to account for 15% of capacity for the year, with strong booking positions as the European season wraps up [27] Company Strategy and Development Direction - The company is focused on building a vacation platform that leads the leisure market through innovative ships and exclusive destinations [6][7] - Plans to expand the exclusive land-based destination portfolio from two to eight by 2028 [7] - The company aims to capture a greater share of the $2 trillion global vacation market by enhancing customer experiences and loyalty [18][19] Management's Comments on Operating Environment and Future Outlook - Management noted strong consumer sentiment towards travel and leisure, with three-quarters of consumers intending to spend the same or more on vacations over the next twelve months [14] - The company is optimistic about the demand environment, with strong bookings and a powerful pipeline of strategic initiatives [13][15] - Despite some adverse weather impacts, the company expects total revenue to increase by approximately 13% year over year in Q4 [11][29] Other Important Information - The company ended the quarter with $6.8 billion in liquidity and adjusted leverage below 3x [35][36] - A 30% increase in the quarterly dividend to $1 per common share was authorized by the Board of Directors [37] - The company repurchased approximately 1.3 million shares during the quarter, with $345 million still available under the current authorization [37] Q&A Session Summary Question: Thoughts on 2026 guidance and yield growth - Management indicated that 2026 earnings are expected to have a $17 handle, with moderate yield growth anticipated [40][76] Question: Clarification on cost growth expectations - Management described cost growth as "anemic," including structural costs and new destination impacts [47][52] Question: Insights on global demand progression - Management noted strong demand across all markets, with a normalization in Canada and robust bookings from Europe [58][59] Question: Concerns about oversupply in the Caribbean - Management acknowledged increased supply but emphasized that it is manageable and that their differentiated assets help maintain demand [64] Question: Yield performance in 2025 - Management explained that yield deceleration in the second half of 2025 is influenced by tougher comparisons and fewer new hardware tailwinds [98]

Core Insights - Carnival Corporation and Royal Caribbean Cruises are both positioned strongly for 2025, driven by resilient demand and strategic investments in destination-led growth [1] - The two companies have different approaches to expansion and value creation, with Carnival focusing on cost efficiency and balance sheet repair, while Royal Caribbean emphasizes premium product leadership and innovation [1][22] Carnival Corporation (CCL) - Carnival's transformation is gaining traction through a destination-led growth model, emphasizing yields and cost efficiency [2] - The debut of Celebration Key is attracting strong guest satisfaction and premium pricing, expected to be a significant revenue driver [3] - Fleet modernization initiatives, such as AIDA Evolutions, are aligning with consumer preferences, enhancing wellness, dining, and entertainment options [4] - Financially, Carnival is improving its balance sheet through deleveraging and refinancing, with over half of next year's bookings secured at higher prices [5] - The Zacks Consensus Estimate for Carnival's fiscal 2025 sales and EPS indicates year-over-year increases of 6.5% and 51.4%, respectively [12] - Carnival's stock has increased by 56.8% over the past six months, outperforming the industry and S&P 500 [17] - Carnival is trading at a forward P/E ratio of 12X, below the industry average of 17.48X [20] - The company is positioned for sustained margin expansion and potential capital distributions, earning a Zacks Rank 1 (Strong Buy) [24][25] Royal Caribbean Cruises Ltd. (RCL) - Royal Caribbean is implementing its "Perfecta" strategy, focusing on sustained earnings growth and innovation-led guest experiences [6] - The addition of new ships like Star of the Seas and Celebrity Xcel is enhancing the fleet with sustainable technology and improved guest amenities [7] - Royal Caribbean's destination projects, such as Royal Beach Club Paradise Island, are expected to elevate guest experiences and strengthen pricing [8] - The company is advancing digital transformation, with nearly half of onboard purchases made through its mobile app, enhancing convenience and revenue [9] - The Zacks Consensus Estimate for Royal Caribbean's 2025 sales and EPS suggests year-over-year increases of 9.1% and 32.5%, respectively [15] - Royal Caribbean shares have gained 54.9% in the past six months [17] - The company is trading at a forward P/E ratio of 16.89X, which is higher than Carnival's [20] - Near-term profitability challenges include elevated operating expenses and cost pressures from new ship launches [11][24]

Connectivity Performance - Starlink's Community Gateway on Royal Caribbean's Star of the Seas delivers 10 Gbps of symmetrical throughput [1] - The symmetrical throughput ensures high-speed connectivity for passengers and crew at sea [1]

Core Viewpoint - Royal Caribbean's recent earnings report showed mixed results, with adjusted earnings exceeding estimates while revenues fell short, indicating a complex financial landscape for the company as it prepares for future performance [2][3]. Financial Performance - In Q2 2025, Royal Caribbean reported adjusted earnings per share (EPS) of $4.38, surpassing the Zacks Consensus Estimate of $4.10, and up from $3.21 in the prior-year quarter [3]. - Quarterly revenues reached $4,538 million, which was below the consensus estimate of $4,550 million but represented a 10.4% increase year-over-year from $4.11 billion [3]. - Passenger ticket revenues were $3.2 billion, up from $2.9 billion in the prior-year quarter, aligning with estimates [4]. - Onboard and other revenues increased to $1.34 billion from $1.22 billion year-over-year, also meeting estimates [4]. - Total cruise operating expenses were $2.28 billion, reflecting a 6.1% year-over-year increase [4]. Cost and Yield Metrics - Net yields rose by 5.2% on a constant currency basis and 5.3% on a reported basis compared to Q2 2024 [5]. - Net cruise costs, excluding fuel, per Available Passenger Cruise Day (APCD) increased by 2.5% on a reported basis and 2.1% at constant currency from the previous year [5]. Cash and Debt Position - As of June 30, 2025, Royal Caribbean had cash and cash equivalents of $735 million, up from $388 million at the end of 2024 [6]. - Long-term debt decreased to $17.61 billion from $18.47 billion at the end of 2024, with the current portion of long-term debt also declining from $1.6 billion to $1.4 billion [6]. Booking Trends - The company is experiencing strong booking momentum, with load factors for 2025 and 2026 exceeding previous years and at higher pricing levels [7]. - There has been an acceleration in bookings, particularly for close-in sailings, contributing to the second-quarter outperformance [7]. - Demand remains robust across all product categories, supported by strong digital and commercial performance [7]. - Upcoming ship launches and the newly announced Royal Beach Club have generated significant interest, indicating positive consumer trends [8][9]. Future Outlook - For Q3 2025, Royal Caribbean expects depreciation and amortization expenses between $425-$435 million and net interest expenses between $235 million and $245 million [10]. - Adjusted EPS is projected to be in the range of $5.55-$5.65 [10]. - For the full year 2025, adjusted EPS is anticipated to be between $15.41 and $15.55, an increase from previous expectations [12]. - The company expects net yields to increase by 3.5-4% year-over-year [12]. Estimate Revisions - There has been a downward trend in estimates revisions over the past month, indicating a shift in market expectations [13][15]. - Royal Caribbean currently holds a Zacks Rank 3 (Hold), suggesting an expectation of in-line returns in the coming months [15].