Royal Caribbean’s Earnings Crucial for Continued Stock Surge
Royal Caribbean’s stock price has experienced significant growth in 2023, more than doubling its value. The cruise line industry has been boosted by the acceleration of its recovery, particularly for international travel. Carnival Corporation and Norwegian Cruise Line Holdings have also experienced impressive surges of 117% and 66%, respectively.
While other travel stocks are facing signs of a slowdown in consumer spending, cruise companies are still in the early stages of post-Covid-19 recovery. They are benefitting from months of pent-up demand and are unlikely to feel the effects of a consumer spending slowdown until at least 2024. However, this doesn’t guarantee that stock prices will continue to rise. The surge in 2023 has raised investor expectations, creating uncertainty about future growth.
Truist analysts recently stated that the concern lies not in whether cruise demand is recovering but in how much of that recovery is already priced into the stocks. This perspective has led the analysts to become more neutral on cruise stocks and hold a Hold rating on Royal Caribbean.
Analysts are projecting earnings per share (EPS) of $1.57 on revenue of $3.4 billion for the second quarter, representing an improvement from the same period last year when there was a loss of $2.08 per share on revenue of $2.18 billion. The focus will then shift to guidance for the third quarter, which is typically the best three months for cruise operators. Analysts anticipate EPS of $2.87 on revenue of $3.8 billion in the September quarter. They also expect the company’s full-year earnings to reach $4.75 per share, toward the upper end of Royal Caribbean’s $4.40 to $4.80 guidance range.
Although U.S. airlines like Alaska Air and American Airlines have demonstrated positive performance this earnings season, Royal Caribbean is in a different stage of recovery. The recent surge in its stock price means that exceeding expectations for the quarter is vital. A guidance hike or strong commentary regarding bookings and pricing could propel the stock further. However, the company faces a high bar in matching investor expectations.
