Royal Caribbean Q4 guidance reflects impact from Hurricane Milton

Royal Caribbean (NYSE:RCL) shares are headed into the open with a modest loss, as the impact from Hurricane Milton had a greater impact on the company’s profit in the current quarter than Wall Street expected. The miss eclipsed better-than-expected profits for Q3 and raised EPS guidance for FY24.

“We see elevated demand patterns continuing as we build the business for 2025, and although the yield comparable will be a high bar, our proven formula of moderate capacity growth, moderate yield growth and strong cost discipline is expected to continue to deliver strong financial results. While we are still very early in the planning process, we anticipate earnings per share in 2025 to start with a $14 handle,” said CEO Jason Liberty.

Fueled by higher passenger ticket revenue and onboard revenue, total revenue for the quarter increased by more than 16% to $4.89B, driving the company’s profit up to $5.20 per share from $3.85 a year ago despite higher operating expenses, including higher costs for food and fuel. Thanks to strength in the company’s European and Alaskan itineraries, net yield exceeded the company’s guidance with a 7.9% improvement.

“The market response to the company’s new ships, existing hardware, and private destinations, has been excellent and accelerating – further positioning the company for yield growth in 2025. Demand for 2025 is strong with booked load factors in line with prior years and at higher rates, allowing for further pricing and yield growth as 2025 bookings continue to ramp up,” the company said in a statement.

However, for the current quarter, Royal Caribbean (RCL) expects to earn a profit of $1.40 to $1.45 per share, attributed to the negative impact from Hurricane Milton. This is slightly better than the same quarter last year, but below $1.57 per share expectations.

Driven by the strong revenue performance in Q3 and expectations for higher prices during the current quarter, the company raised its profit guidance to $11.57 to $11.62 per share for the remainder of the year, versus initial guidance of $11.35 to $11.45. This exceeds the consensus estimate of $11.58.

Royal Caribbean (RCL) shares are down 2.8% in premarket trading, spilling over into shares of Norwegian Cruise Line Holdings (NCLH), Carnival Corporation (CCL), and Viking Holdings (VIK).