Key Takeaways
- Royal Caribbean delivered Q1 adjusted EPS of $3.60, surpassing the analyst consensus of $3.20
- Revenue increased 11% year-over-year to reach $4.45 billion
- The company lowered its full-year EPS forecast to $17.10–$17.50 from $17.70–$18.10, citing elevated fuel expenses and Middle East disruptions
- The revised guidance range still exceeds Wall Street’s consensus estimate of $17.09
- RCL stock climbed 8% during premarket hours — bouncing back after falling 8% throughout April
Royal Caribbean delivered impressive first-quarter results that exceeded analyst projections, even as the stock lagged the broader market rally during April.
The cruise operator reported net income of $950 million, translating to $3.48 per share, compared to $730 million, or $2.70 per share, during the corresponding quarter last year.
When adjusted for one-time items, earnings per share reached $3.60. Wall Street analysts had forecast $3.20, making the outperformance significant.
Royal Caribbean Cruises Ltd., RCL
Revenue grew 11% from the prior year to hit $4.45 billion, falling just short of the $4.46 billion consensus estimate.
Shares surged 8% in Thursday’s premarket session — a sharp reversal for a stock that had declined 8% during April, completely missing the S&P 500’s strongest monthly performance since November 2020.
The cruise line did revise its full-year adjusted EPS guidance downward. Management now expects $17.10 to $17.50, compared to the previous range of $17.70 to $18.10.
Two primary factors drove the adjustment: escalating fuel expenses and diminished revenue from Middle Eastern cruise routes amid the continuing Iran conflict.
Factoring in hedging strategies, the fuel cost impact amounts to approximately $0.62 per share above prior projections — totaling around $1.3 billion. While substantial, the figure came in below investor concerns.
Revised Forecast Still Tops Analyst Estimates
Despite the downward revision, the midpoint of Royal Caribbean’s updated full-year EPS guidance remains above the Street’s consensus of $17.09. This likely explains the positive market reaction.
For the second quarter, management projected net yield growth of 0.9% and adjusted EPS between $3.83 and $3.93. Analysts had been anticipating $4.02, meaning the Q2 forecast fell somewhat short.
For the complete year, the company expects net yield expansion of 2.3% to 3.3%.
CEO Jason Liberty highlighted robust consumer appetite for the company’s cruise offerings and emphasized the organization’s “fortified balance sheet” as catalysts for sustained double-digit revenue and earnings expansion in 2026.
Temporary Booking Weakness Reversed
Booking activity experienced softness during March and early April. The company attributed reduced demand for Mediterranean and West Coast Mexico sailings to geopolitical uncertainties.
However, Royal Caribbean noted that bookings have since rebounded and are currently tracking above year-ago levels.
This represents an important indicator given the widespread concerns affecting the cruise industry this year.
Elevated oil prices stemming from Middle East instability have increased operating costs industry-wide, impacting Royal Caribbean, Carnival, and Norwegian Cruise Lines alike.
Certain analysts had suggested that consumers facing higher gasoline prices might curtail discretionary spending on experiences like cruises.
Currently, Royal Caribbean’s booking trends suggest otherwise — customer demand remains robust.
The stock’s 8% premarket jump on Thursday signals investor reassurance that the guidance reduction was less severe than anticipated, and that fundamental demand dynamics remain healthy entering the peak summer travel period.
