Royal Caribbean Earnings Should Chart the Course for the Stock After an Impressive Year
Royal Caribbean, the cruise operator that outperformed its peers in the S&P 500 last year, is set to release its fourth-quarter earnings report on Thursday. This report will provide crucial insights into the company’s future, indicating whether it will continue sailing smoothly or face challenges ahead.
Analysts anticipate earnings per share of $1.14 on revenue of $3.4 billion, a significant improvement from the year-ago quarter when the company reported a loss of $1.12 earnings per share on revenue of $2.6 billion. If Royal Caribbean surpasses these expectations, it will mark its seventh consecutive quarterly earnings beat.
While the impressive earnings streak is noteworthy, investors are particularly interested in the company’s outlook. In 2023, Royal Caribbean’s shares skyrocketed by 162%, ranking third behind Nvidia and Meta Platforms in terms of performance. This surge was fueled by robust international travel demand throughout the first three quarters of the year. The entire cruise industry experienced a similar surge, with Carnival stock climbing 130% and Norwegian Cruise Line Holdings rising by 64%.
However, 2024 has painted a different picture for cruise stocks. Since the beginning of the year, Carnival’s shares have fallen 11%, Norwegian’s by 12%, and Royal Caribbean’s by 2%. Royal Caribbean’s shares did recover slightly after a 7% drop on the first trading day of the year. Despite this, Wall Street’s average price target of $131.18 on Royal Caribbean shares suggests a potential 4% increase from the current price of $126. Moreover, 73% of analysts covering the company rate the shares as Buy.
The cruise industry’s recovery has lagged behind other sectors of the travel industry, primarily due to the slower rebound of international travel. However, analysts believe that 2024 holds the potential for even better results than the previous year, both in terms of revenue and profit. The current consensus estimate for Royal Caribbean’s full-year earnings in 2024 is $9.21 per share on sales of $15.8 billion, indicating expected growth of 39% in earnings per share and 14% in revenue compared to 2023 estimates.
Sharon Zackfia, an analyst at William Blair, expressed positivity about Royal Caribbean’s future, stating, Our pricing checks suggest demand trends remain strong, and we expect a healthy 2024 outlook. She maintained an Outperform rating on the stock.
Another aspect to watch closely is the impact of geopolitical events on the cruise industry. Royal Caribbean recently announced the cancellation of two voyages due to security concerns and confirmed its vigilance in monitoring the situation. In a similar vein, Carnival rerouted 12 ships scheduled to travel through the Red Sea, citing potential adverse effects on full-year earnings. However, both companies expressed confidence that strong booking momentum would offset these challenges.
Investors and industry observers eagerly await Royal Caribbean’s earnings report to gauge its performance amidst a changing landscape. The outcome will provide crucial insight into the company’s ability to navigate rough waters and maintain its strong position within the industry.
In conclusion, Royal Caribbean’s earnings report will shed light on its performance in the previous quarter and its outlook for the future. With the company’s impressive track record and the cruise industry’s recovery, investors anticipate positive results. However, the continually evolving geopolitical landscape introduces an element of uncertainty. By carefully analyzing Royal Caribbean’s earnings and management’s comments, stakeholders will gain valuable insights to inform their investment decisions.
Sources:
– Anonymous. (2021, January 25). Royal Caribbean Group (RCL). Yahoo! Finance.
– Rhone, A. (2023, November 16). Here’s Why Royal Caribbean Stock Is Setting Sail Again. Barron’s.
