Key Points
Iran War notwitstanding, Royal Caribbean continues to grow sales and earn good profits.
The cruise line stock beat analyst targets and raised guidance this morning.
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Royal Caribbean (NYSE: RCL) stock jumped a lucky 7.7% through 12:15 p.m. ET Thursday after beating on top and bottom lines in its Q1 earnings report this morning.
Heading into the report, analysts forecast the cruise line stock to earn $3.22 per share on sales of just under $4.5 billion. In fact, Royal Caribbean earned $3.60 per share -- and hit $4.5 billion in revenue on the nose.
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Royal Caribbean Q1 earnings
The news wasn't quite as good as that sounds. Royal Caribbean's "$3.60" profit was only a non-GAAP number for example -- its actual earnings calculated under generally accepted accounting principles (GAAP) were only $3.48 per share.
But even so, $3.48 represented a strong 29% year-over-year profit improvement, nearly three times Royal Caribbean's 11% sales improvement, and better than management had expected to earn.
And more improvements are coming.
What's next for Royal Caribbean stock
CEO Jason Liberty says investors can expect Royal Caribbean to keep on reporting "double-digit revenue and earnings growth" all year long, and is raising guidance to match.
Revenue is expected to grow roughly 10% year over year. The rising price of fuel as a result of the Iran War is still a concern, and may increase costs by $1.3 billion more than previously hoped. But even so, management anticipates earning between $17.10 and $17.50 per share through the end of the year.
Again, these are non-GAAP numbers, so GAAP earnings could be more modest. Still, we're probably looking at something on the order of a 16 current-year P/E on the stock. With revenue growing 10% or 11%, profits growing even faster, and a tidy 1.7% dividend yield to sweeten the deal, Royal Caribbean stock looks priced fairly to me.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.
