Shares of Royal Caribbean (NYSE:RCL) are underwater into the open as a better-than-expected profit in the third quarter and raised outlook for the year failed to compensate for a slight miss on revenue and disappointing guidance for both the current quarter and fiscal year ahead.
The cruise operator turned in a relatively solid quarter with load factor, number of passengers carried, and average passenger cruise days all improving from a year ago. In addition, on board spending and ticket revenue both increased from last year, resulting in a 4.3% gain in total revenue to $5.14B, though slightly less than $5.17B expected.
By controlling costs for labor, food and fuel, Royal Caribbean’s (NYSE:RCL) profit improved to $5.75 per share, up 11% from the same quarter last year and 7 cents better than anticipated. Adjusted EBITDA of $2.3B increased by 7% year-over-year.
The company ended the quarter with $6.8B of liquidity, down from $7.1B the prior quarter, but sufficient to cover maturing debt. To account for increased debt in the third quarter, RCL raised its interest expense guidance to $945M to $955M versus prior guidance of $930M to $940M.
For the current quarter, Royal Caribbean (NYSE:RCL) expects capacity to increase by 10.3% driven by the introduction of its newest ship, Star of the Seas, and the upcoming launch of Celebrity Xcel next month. With higher capacity, increased onboard spending, and costs expected to decrease by 5.7% to 6.2%, adjusted EPS in Q4 is anticipated to be between $2.74 and $2.79 per share, almost double from a year ago, but less than the consensus estimate of $2.90.
For FY25, RCL raised its profit guidance to $15.58 to $15.63 per share from $15.41 to $15.55 previously, though still below $15.69 estimates.
“Looking ahead, while it’s still early in the planning process, our strong booked position gives us confidence for 2026 and beyond. With our proven formula of moderate yield growth, strong cost controls, and disciplined capital allocation, we expect 2026 earnings per share to have a $17 handle, positioning us well to achieve our 2027 Perfecta targets,” said Royal Caribbean CEO Jason Liberty.
Estimates, however, are for FY26 earnings of at least $18.21 per share.
Royal Caribbean (RCL) shares are down more than 8% in premarket, weighing on peers in the segment, including Carnival Corp (CCL), Norwegian Cruise Lines (NCLH), and Viking Holdings (VIK).