Royal Caribbean Group reported a profit for the second quarter on Thursday that was higher than expected. The company also raised its outlook for the whole year, saying that demand for cruises would remain high into next year and that spending onboard would rise.
The business
Also, RCL -5.91% said it would start paying a dividend again, which would be the first time since March 2020, when the COVID-19 pandemic began.
“Since the last earnings call, both demand and prices have stayed very strong.” The cruise company said in a statement that bookings were higher than the same time in 2023 and that prices were at all-time highs.
“Consumer spending onboard and before the cruise continue to significantly exceed 2023 levels,” the company said. “This is due to more people joining and paying higher prices.”
And on the call with analysts after the earnings report, CEO Jason Liberty gave the company and the cruise industry a positive outlook. He said that people are still more likely to buy cruises because the prices are still “an attractive value proposition.”
He said he thinks there is “a 20% value gap” between cruises and vacations on land, which I think is what is keeping the company from hearing the “noise” from vacations on land.
Liberty said, “We continue to see a very positive sentiment from our customers, bolstered by a resilient economy, low unemployment, stabilizing inflation, and record high household net worth.” This was recorded by AlphaSense. “Consumers continue to decide that they want to spend their money on experiences, especially travel.”
He also said that people have 10% more vacation days than they did in 2019 and are traveling with half of that extra time.
Liberty said, “In fact, our research shows that consumers are spending more on travel than on any other type of leisure, and they plan to keep spending more on travel over the next 12 months.”
Based on demographics, he said the longer-term outlook for cruises is still positive.
Liberty said that by 2030, that number of baby boomers reaching retirement age will have grown by 30%, to 73 million. These people plan to travel more.
That’s not all, though. Liberty said that research shows that younger generations, especially millennials and younger, plan to spend more of their extra free time traveling than doing anything else.
Freedom said, “This appealing traveler continues to grow our customer base at a faster rate than any other generation.” “And now, one out of every two customers is twenty-five or younger.”
Even though everyone was optimistic, the stock fell 4.8% in midday trading, adding to the 3.6% drop that happened the day before. Since July 16, when it hit a high of $172.08, the stock has down 9%.
The only bad thing about Royal’s earnings report was that the number of passenger cruise days rose less than expected and the number of rooms occupied fell a bit short of expectations, even though costs were expected to go up.
Net income for the quarter ending June 30 increased from $459 million, or $1.70 per share, the same time last year to $854 million, or $3.11 per share.
Adjusted earnings per share of $3.21 beat the FactSet consensus of $2.76 when one-time items were taken out.
This was more than the $4.05 billion that FactSet thought it would be. Total revenue rose 16.7% to $4.11 billion, with ticket sales up 18.1% to $2.89 billion and onboard and other sales up 13.3% to $1.22 billion.
The number of passenger cruise days went up 7.6% to 13.23 million, but it was less than the 13.38 million that FactSet predicted. The occupancy rate went up from 105% to 108.2%, but it was less than the 108.3% that was expected.
The business said it would give 40 cents per share to shareholders who owned shares as of September 20th. The payment will be made on October 11th.
The annual dividend rate of $1.60 per share means a dividend yield of 1.02% at current stock prices. This is higher than the implied yield for the S&P 500 index, which is 1.00%.
SPX 0.21% of 1.35%.
The company’s competitor in the public cruise business is Carnival Corp.
CCL -5.36%, which stands for Norwegian Cruise Line Holdings Ltd.
Viking Holdings Ltd. (-3.59%) and NCLH inc.
VIK 1.32%, don’t pay a dividend right now.
The company thinks that adjusted EPS will be between $4.90 and $5.00 in the coming months, which is more than the current FactSet consensus of $4.77.
The company raised its EPS guidance range for 2024 from $10.70 to $10.90 to $11.35 to $11.45 range.
There will be between 10.4% and 10.9% net yields instead of 9% to 10% before.
On the cost side, the expected increase in net cruise costs per available passenger cruise days from one year to the next was raised from 3.7% to 4%.
As of Wednesday, the stock had gone up 21% year to date, while the S&P 500 had gone up 14.8%.
