Royal Caribbean Beats Earnings (4th Time in a Row)... But a Scandal and Sell-Off Rock the Boat

After dealing with the fallout from a disturbing ex-employee scandal involving unauthorized videotaping (which has resulted in an ongoing lawsuit), Royal Caribbean came in hot with a Q3 earnings report that didn’t just beat expectations — it hiked full-year guidance for the fourth time this year (cue DJ Khaled’s “All I Do Is Win” on repeat). 

And still, investors decided to SELL, SELL, SELL. The stock took a 2.1% dip early this morning, probably due to a mix of profit-taking and the realization that maybe Wall Street’s not feeling the “perpetual vacation” vibes. (Or, maybe everyone’s just holding out for a “buy one, get one free” cruise deal like me.)

Royal Caribbean served up $5.20 in adjusted EPS, smashing the $5.04 that analysts were hoping for, alongside $4.9 billion in revenue — up 18% from last year. The only caveat? That same $4.9 billion was also Wall Street’s expectation, so we all know how that goes. Demand’s still coming in strong, though, with travelers willing to drop extra for every add-on under the sun: drink packages, Wi-Fi, shore excursions — if there’s an upcharge, cruisers are onboard. 

CEO Jason Liberty even threw in an “exceptional” to describe the results (humble brag alert) and added that demand keeps giving them that extra pricing edge. In plain speak? People want vacations, and they’re willing to pay whatever Royal Caribbean slaps on the price tag. (This might be the only company that’s not blaming the economy and recession for slow sales.)

Because business is booming, Royal Caribbean upped its full-year EPS forecast to somewhere between $11.57 and $11.62 per share, bumping it up from the previous range of $11.35–$11.45. This marks the fourth guidance hike in 2024 alone, and they’re clearly not in a rush to slow down. 

But just when everything was going all hunky dory, along comes Hurricane Milton, cutting through the Atlantic and deleted numbers inside the Q4 expectations spreadsheet. The cruise line now expects Q4 EPS to be around $1.40–$1.45, shy of Wall Street’s rosier $1.58 forecast. On top of that, the company’s dealing with some annoying “timing of costs” (like non-cash stock compensation), which threw some cold water on their otherwise hot shower.

This earnings crush comes after Royal Caribbean is going against the grain with its new “Discovery Class” ships. Instead of the mega floating cities they’re known for (looking at you, Oasis and Icon classes), they’re building smaller ships designed to explore lesser-known, picturesque ports. These new vessels are necessary as some of the fleet starts to age out. (Turns out even cruise ships have midlife crises.) Liberty says it’s about reaching those off-the-beaten-path destinations — places that give you bragging rights beyond “we hit up Cozumel… again.”

Ships aside, Royal Caribbean’s getting strategic about private destinations. They’re rolling out exclusive experiences with “Perfect Day Mexico,” a private beach playground set to open in 2027, joining their other beach clubs and private ports. 

(Source: Royal Caribbean)

And get this: Royal Caribbean’s occupancy hit 111% in Q3. That means they not only sold out but managed to pack in a few extra guests — basically, they’re squeezing out every dollar from every square inch of these ships. More bodies on board mean more chances to rack up those Wi-Fi and drink package sales, and Royal Caribbean is happy to collect.

Royal Caribbean’s been on a stock market tear this year, with a 162% gain in 2023 alone, placing them right behind Nvidia and Meta. So maybe it was a good time for investors to do some profit taking after all?

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