On Tuesday, Stifel, a financial services firm, maintained its Buy rating and a $25.00 price target for Royal Caribbean Cruises (NYSE:RCL). The company's financial performance for the second quarter of 2024 showed revenue figures surpassing expectations, with gross and net revenues reaching $5.8 billion and $4.4 billion, respectively. These figures slightly exceeded the forecasted values of $5.7 billion and $4.3 billion.
Fuel expenses for the quarter were reported at $525 million, with a net interest expense of $425 million. Adjusted EBITDA for the cruise operator was $1.2 billion, which was $147 million above the provided guidance. This result also surpassed the $1.1 billion adjusted EBITDA forecasted by Stifel, which was in agreement with the consensus estimate.
Earnings per share (EPS) for Royal Caribbean showed a positive outcome, with GAAP EPS at $0.07 and adjusted EPS at $0.11. These figures notably outperformed the anticipated EPS of ($0.01), which was in line with the general market consensus.
The company's revenues demonstrated significant growth compared to pre-pandemic levels, with an increase of 19% compared to the second quarter of 2019 and an 18% year-over-year growth.
Customer deposits saw a substantial rise, ending the second quarter at $8.3 billion. This marked an increase of approximately $1.3 billion from the end of the first quarter of 2024 and exceeded the previous highest level by about 15%. In light of these results, Royal Caribbean's management has updated its full-year 2024 guidance.
Adjusted EBITDA expectations have been raised to approximately $5.83 billion from the prior estimate of $5.63 billion. Moreover, the company now projects constant currency net yield growth of 10.25% and net cruise cost excluding fuel growth of 4.5%, which are improvements from the previous forecasts of 9.5% and 5.0%, respectively.
In other recent news, major cruise lines including Royal Caribbean, Carnival (NYSE:CCL), and Norwegian Cruise Line (NYSE:NCLH) Holdings are offering discounted summer fares in response to an increase in ship numbers. The price reductions are seen as a strategy to fill cabins on older ships, with AAA data suggesting a downward trend in cruise costs for the upcoming season. The rerouting of ships from Red Sea routes due to the Israel-Hamas conflict has also influenced this pricing strategy.
Royal Caribbean is specifically reducing rates for Caribbean cruises in the third and fourth quarters, and cruises rerouted to sail around Africa are being offered at discounted rates. The introduction of new ships like Royal Caribbean's Icon (NASDAQ:ICLR) of the Sea has further influenced the pricing strategy, with older vessels being offered at lower prices.
Argus has increased its price target on Royal Caribbean shares in light of high occupancy rates, and Deutsche Bank has also raised its stock price target for the company, anticipating yield and earnings growth.
In response to increased cruise demand, Royal Caribbean is planning to hire around 10,000 workers throughout 2024. This hiring initiative coincides with the introduction of three new ships to the company's fleet. These are recent developments in the cruise industry.
InvestingPro Insights
InvestingPro data highlights Royal Caribbean Cruises (NYSE:RCL) as a company with a strong market presence, boasting a market capitalization of $41.07 billion. The company's financial resilience is further underscored by a robust revenue growth of 38.2% over the last twelve months as of Q1 2024. Moreover, the stock has demonstrated significant investor confidence, reflected in a 57.8% one-year price total return, and is currently trading near its 52-week high at 99.65% of the peak value.
InvestingPro Tips suggest that Royal Caribbean is an intriguing pick for investors seeking growth, as the company has been profitable over the last twelve months and analysts predict profitability will continue this year. Still, potential investors should be aware of the company’s liquidity position, as short-term obligations currently exceed liquid assets. For those considering diving deeper into Royal Caribbean's financial metrics, InvestingPro offers several additional tips on their platform.
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