Royal Caribbean Earnings: Consumer Demand Is Full Steam Ahead on the High Seas; Shares Fairly Valued

The appetite for cruise holidays hasn’t abated, driving profitability significantly higher at narrow-moat Royal Caribbean. At the start of the year, Royal forecast EPS of $9.50-$9.70 for 2024 but has since lifted its outlook twice. The firm is on track to generate $10.70-$10.90, well ahead of our $10.23 estimate before the earnings report and a high-water mark for the company—despite having more shares and more than double the debt-service cost compared with 2019. All potential contributors to higher profitability have helped, including solid close-in demand, strong onboard revenue, and favorable expense timing. Investors responded well to the lift in outlook and first-quarter outperformance, with shares up 2% in a down market. Even as we expect to raise our $125 fair value estimate by a high-single-digit rate, we view shares as fairly valued.