Royal Caribbean Group RCL has been seeing strong demand for cruises in 2024. This Zacks Rank #1 (Strong Buy) recently raised full year earnings guidance.
Royal Caribbean operates a global fleet of 68 cruise ships across five brands. Its ships travel to approximately 1,000 destinations, serving millions of guests each year. Its brands include Royal Caribbean International, Celebrity Cruises and Silversea.
The company also owns 50% of a joint venture which operates TUI Cruises and Hapag-Lloyd Cruises.
Another Earnings Beat in Q2 2024
On July 25, 2024, Royal Caribbean reported its second quarter 2024 earnings and beat on the Zacks Consensus by $0.44. Earnings were $3.21 versus the Consensus of $2.77.
It was the 10th consecutive earnings beat. You have to go back to early 2022 to find a miss.
Royal Caribbean beat its own guidance for the quarter due to stronger pricing on close-in demand and continued strength in onboard revenue.
Gross Cruise Costs per Available Passenger Cruise Days (“APCD”) increased 4.9%.
The demand and pricing environment remained strong in Q2. Booking volumes were higher than the same period in 2023 and at record pricing levels.
Royal Caribbean continued to see record booked position for 2024 sailings and consumer spending onboard. Pre-cruise purchases continued to “significantly exceed” 2023 levels.
The strong demand also appears to be continuing into bookings for 2025, as the company is already taking more bookings for 2025 sailing than 2024.
How Good Is It? Royal Caribbean Raised Full Year Guidance
With this strong demand continuing, it shouldn’t be a surprise that Royal Caribbean raised its full year earnings guidance. It raised the range to $11.35 to $11.45. This was above the Zacks Consensus.
The analysts followed suit, revising their estimates higher for 2024.
5 estimates were raised in the last 30 days, pushing the Zacks Consensus above the company’s new guidance range, to $11.50, from the previous consensus of $11.14.
That’s earnings growth of 69.9% versus 2023 as Royal Caribbean earned just $6.77 last year.
The analysts are also bullish about what they heard for 2025 too. 5 estimates were revised higher for next year in the last month, pushing up the Zacks Consensus to $13.39. That’s another 16.4% earnings growth.
Image Source: Zacks Investment Research
Royal Caribbean Re-Started the Dividend
Royal Caribbean was so bullish about meeting its financial goals, a full 18 months early, thanks to strong bookings the last few years, that it re-instated the quarterly dividend. It will pay $0.40 per quarter.
That’s a yield of 1%.
Shares of RCL Soar but Are Still Cheap
The stock has been on quite a run the last year. It has easily outperformed the S&P 500, which hasn’t been a slouch itself.
Image Source: Zacks Investment Research
Royal Caribbean hit new 5-year highs this year before pulling back in the recent market sell-off.
But it’s still attractively priced. It trades with a forward Price-to-Earnings (P/E) ratio of just 13.7. A P/E ratio under 15 is considered to be a value stock.
And with the big earnings growth expected, and the low P/E, it has a PEG ratio, which is the P/E divided by growth, of just 0.4. A PEG ratio under 1.0 usually indicates a company has both value and growth, a rare combination.
The Street is worried that the consumer is done with all their vacation spending. Royal Caribbean has said otherwise.
For investors looking for a play on travel and experiences, Royal Caribbean should be on your short list.
[In full disclosure, Tracey manages the Insider Trader portfolio at Zacks, which currently owns RCL.]
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
