Royal Caribbean Earnings: Banner Results and Demand Momentum Keep Pricing Sailing Higher

Narrow-moat Royal Caribbean printed another stellar set of financial results, showing adjusted EPS of $5.20, up 36% versus last year, thanks to robust pricing and lower costs. Yields rose a whopping 7.9% as-reported, outpacing the firm’s 6.5%-7% guide and our 6.5% forecast, as close in pricing and healthy onboard spending outperformed. While the cost profile was impressive, rising a mere 2.7%, timing shifts will give some upside back in the fourth quarter, with as-reported net cruise costs set to rise around 8%. Even with costs outpacing yields in the fourth quarter, Royal will see earnings growth, aided by higher capacity and lower interest expense.