Royal Caribbean's stock soars to pre-COVID levels after earnings beat and big bump up in outlook

By Tomi Kilgore and Ciara Linnane

Cruise demand has been 'exceptionally strong' and bookings have priced at record levels

Shares of Royal Caribbean Group have now recovered everything they lost because of the COVID-19 pandemic, with the cruise operator reporting second-quarter results that beat forecasts and giving a big boost to its full-year outlook, citing "exceptionally strong" demand and record pricing.

The stock (RCL) shot up 8.6% in afternoon trading Thursday, which puts it on track to close at the highest price since Feb. 20, 2020. That was about three weeks before the World Health Organization declared COVID-19 a pandemic.

"Our brands continue to fire on all cylinders, resulting in record yields and second-quarter earnings significantly exceeding our expectations," said Royal Caribbean Chief Executive Officer Jason Liberty.

The company swung to net income of $458.8 million, or $1.70 a share, from a loss of $521.6 million, or $2.05 a share, in the same period a year ago.

Excluding nonrecurring items, adjusted earnings per share of $1.82 beat the FactSet consensus of $1.57.

Total revenue grew 61.3% to $3.52 billion, above the FactSet consensus of $3.41 billion, as onboard revenue jumped 40.9% to $1.08 billion and passenger ticket revenue increased 72.3% to $2.44 billion.

Bookings remain "significantly higher" than the pre-COVID levels of 2019 and are at record pricing levels. Bookings for 2024 cruises are significantly higher than all prior-year periods and are at record prices.

"Demand for cruising and our brands is exceptionally strong, and we have seen another steep change in booking volumes and pricing, leading us to now expect double-digit net yield growth for the full year," CEO Liberty said.

For 2023, the company raised its guidance ranges for adjusted EPS to $6-$6.20 from $4.40-$4.80 and for net yields compared with 2019 to 11.5%-12% from 6.25%-7.25%.

Royal Caribbean's performance helped lift the shares of its rivals, as Carnival Corp.'s stock (CCL) climbed 5.1% in afternoon trading and Norwegian Cruise Line Holdings Ltd. shares (NCLH) jumped 5.1%.

The company's most active bonds, meanwhile, have seen net buying over the last 10-days, according to BondCliQ Media Services, with the 11.625% notes that mature in 2027 seeing $36.5 million in flows.

The following chart offers a comparison of flows for the three main cruise operators, including Carnival Corp. (CCL) and Norwegian Cruise Lines Holding Ltd. (NCLH).

The stock has rocketed 121.7% year to date, while the S&P 500 has advanced 19.3%.

-Tomi Kilgore

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07-27-23 1328ET

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