Royal Caribbean Earnings: Consumer Interest in Travel Offers Wind in the Sails Despite Macro Worries

We plan to raise our $86 fair value estimate for no-moat Royal Caribbean by a high-single-digit rate due to better- than-expected first-quarter results and an elevated outlook for 2023. The first quarter delivered sales of $2.9 billion, in line with our outlook, and an adjusted EPS loss of just $0.23, which was a whopping $0.45 better than our forecast. The outperformance was attributed to better close-in bookings, higher prices, strong onboard spending, and solid expense management. Record bookings, which arose from a successful wave season, now position Royal for pricing at a high-single-digit rate above 2019 levels in 2023, by our math. Because of demand trends, Royal lifted the midpoint of its 2023 EPS guidance by $1.30, to $4.40-$4.80, placing the firm on track to deliver 2023 EBITDA that is nearly 10% above 2019's level. All signs point to resilient interest in the travel experience, with spending on services over goods remaining persistent, which supports Royal's lift of its 2023 as-reported pricing growth outlook to 6.25%-7.25%, from 2.5%-5.5%. With $5.3 billion in advance ticket sales, up an impressive 26% sequentially (in line with no-moat Norwegian's customer deposit growth in the period), evidence exists that cruise demand is holding up.