Key Points
Royal Caribbean reported a mixed earnings report, but also delivered strong guidance.
The company is on-track to meet its 2027 "Perfecta" program financial goals.
Royal Caribbean has paid down its pandemic debt faster than peers and is already repurchasing stock again.
- 10 stocks we like better than Royal Caribbean Cruises ›
Shares of Royal Caribbean (NYSE: RCL) rallied 16.4% in January, according to data from S&P Global Market Intelligence.
Royal Caribbean actually had a relatively quiet month, stock price-wise, until its Jan. 29 earnings report. On that release, Royal Caribbean missed revenue expectations but met profit expectations; however, its initial 2026 guidance came in stronger than expected, lifting shares significantly over the last two trading days of the month.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Royal Caribbean sees smooth sailing ahead
In the fourth quarter, Royal Caribbean grew revenue 13.2% to $4.26 billion, slightly missing expectations, while adjusted (non-GAAP) earnings per share rallied 71.8% to $2.80, meeting analyst estimates.
That's impressive growth, though revenue misses and merely "meeting" EPS expectations are usually met with a sell-off, not a rally. Fortunately, forward guidance typically supersedes the results reported in the prior quarter. And in this case, Royal Caribbean provided the goods. Management now expects $17.70 to $18.10 in adjusted EPS for 2026, good for 14.5% earnings growth at the midpoint, and above analysts' estimates of $17.66.
CEO Jason Liberty also noted the company was on track to deliver its Project Perfecta goals laid out in 2024, which call for a 20% annualized EPS growth between 2024 and 2027, with return on invested capital reaching 17% or higher by the end of the period. While the 2026 guidance would only amount to 14.5% growth, that would still put the two-year average growth rate at 23%. Liberty also noted that the company's ROIC had already reached the high teens in 2025.
In addition, Liberty noted that 2026 is two-thirds booked at solid rates, and that Royal Caribbean had seven of the best booking weeks in its history since the lastearnings call Needless to say, management was quite optimistic about the picture moving forward.
Image source: Getty Images.
Royal Caribbean is financially safer than its peers, but more expensive
Royal Caribbean has done a better job of recovering from the pandemic than its other public market peers, with a debt-to-EBITDA ratio below 3.0, which is back under management's target range.
In fact, Royal Caribbean has even begun repurchasing stock, which is fairly surprising given that it is only five years after the end of the pandemic, when cruise companies had to take on lots of debt to bridge them to the post-pandemic era.
The success is owed to Royal's superior adjusted EBITDA margin of 37% over the past 12 months, which is about 10 percentage points better than its publicly traded peers'. The higher margins come from Royal Caribbean's streamlined portfolio of just having three main brands, its investment in owned, private destinations, and its portfolio of high-capacity, high-profit mega-ships.
Of course, Royal does trade at a significant premium valuation to peers Carnival (NYSE: CCL) and Norwegian Cruise Lines (NYSE: NCLH), with a 17.4 times EV-to-EBITDA ratio compared with a Carnival and Norwegian's valuations around 10, so investors are definitely paying up for Royal's higher-quality cash flows.
While Carnival and Norwegian may be riskier, those peers may outperform Royal as the industry recovers from the pandemic with a greater debt paydown and further de-risking from a lower valuation. However, long-term investors who are bullish on the cruising industry may want to concentrate on Royal Caribbean, given its structural advantages and higher-margin business.
Should you buy stock in Royal Caribbean Cruises right now?
Before you buy stock in Royal Caribbean Cruises, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Royal Caribbean Cruises wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $439,362!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,164,984!*
Now, it’s worth noting Stock Advisor’s total average return is 918% — a market-crushing outperformance compared to 196% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of February 10, 2026.
Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
