Royal Caribbean Group (NYSE:RCL) is gearing up to unveil its fourth-quarter 2023 results on February 1, 2024, following a noteworthy earnings surprise of 12.2% in the previous quarter.
Estimate Trends
Analysts project Royal Caribbean’s fourth-quarter earnings per share (EPS) to be $1.13, a significant improvement from the loss per share of $1.12 reported in the same period the previous year. Revenue expectations are set at $3.4 billion, reflecting a robust 29.6% increase compared to the figures reported in the corresponding quarter of the prior year.
Analyzing the Landscape
Several factors have contributed to shaping Royal Caribbean’s performance in the upcoming quarter. The expected surge in the fourth-quarter top line is attributed to an escalating demand environment, a resilient pricing structure, and sustained strength in onboard revenue sectors. The company’s digital initiatives, enhanced commercial capabilities, and ship upgrades are anticipated to have played a pivotal role in driving robust demand.
Revenue Projections
Our model forecasts a 37.1% year-over-year increase in fourth-quarter passenger ticket revenues, reaching $2.3 billion. Onboard and other revenues are expected to rise by 12.7% year over year, totaling $1 billion.
Yield Improvements
A strong book position, increased ticket and chipboard rates (for like-for-like chips), and new hardware additions are believed to have set the stage for yield improvements in the fourth quarter. Royal Caribbean aims for net yields to increase by 15-15.5% (on a reported basis) and 16.2-16.7% (constant-currency basis) from 2019 levels. Our model predicts fourth-quarter net yields at $226.7 million (reported basis) and $230.3 million (constant-currency basis).
Margin Challenges
Despite positive factors, elevated costs related to fuel and food are expected to have impacted margins in the fourth quarter. Royal Caribbean forecasts a year-over-year increase in net cruise costs (excluding fuel per Available Passenger Cruise Day or APCD) by 3.3-3.8% (reported basis) and 3.9-4.4% (constant currency) in the fourth quarter. Our model estimates net cruise costs at $121.4 million (reported basis) and $122.2 million (constant-currency basis).
Management Guidance
Management anticipates a $0.18 negative impact on the fourth-quarter bottom line due to factors such as FX, fuel rates, and the cancellations of Israeli sailings. Adjusted EPS for the fourth quarter is estimated to fall within the range of $1.05-$1.10, reflecting the company’s proactive approach to managing challenges while navigating through dynamic market conditions.
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