Royal Caribbean Group (RCL) Q3 2024 Mobile Revenues: Strong Growth and Strategic…

• Full Year Yield Increase: It is expected to rise by more than 11%.

• Full Year Salary Increase: It is expected to increase by more than 70%.

• Cash flow: On track to give away more than $3.3 billion this year.

• Good Summary: It rose 7.9% year over year, 110 basis points above guidance.

• Adjusted Earnings Per Share (Q3): $5.20, an effective guidance of more than $0.25 per share.

• Adjusted EBITDA (Q3): $2.1 billion, 24% year-on-year growth.

• Adjusted EBITDA margin (Q3): 44%, 240 basis points higher than last year.

• Ship Cost Excluding Fuel (Q3): It increased by 4% in constant currency.

• Cost of a Full Year’s Cruise without Fuel: It is expected to rise from 6.2% to 6.7%.

• Adjusted Earnings per Share (Full Year): It rose to $11.57 from $11.62.

• Fourth Quarter Results: It is expected to rise from 5.1% to 5.6%.

• Fourth Quarter Adjusted Earnings Per Share: It is expected to be $1.40 to $1.45.

• Liquidity: It ended the quarter at $3.9 billion.

• Debt Relief: It refinanced $3.5 billion in debt, lowering rates by 300 basis points.

• Strengthen: Less than 3.5 times from the third quarter after the next 12 months.

Publication Date: October 29, 2024

For a complete earnings call transcript, please see the full earnings call transcript.

Good Points

• Royal Caribbean Group (NYSE:RCL) reported exceptional third-quarter results, beating expectations with steady demand and higher prices across key cruise lines.

• The company has increased its full-year production and earnings guidance, with full-year production expected to rise by more than 11% and earnings by more than 70%.

• RCL is on track to issue more than $3.3 billion this year and has returned to a fully unsecured position, which supports growth ambitions.

• The company has announced an exciting expansion of its independent properties, including Perfect Day Mexico and a new hotel in Puerto Williams, Chile.

• RCL’s strategic focus on moderate capacity growth, moderate productivity growth, and strong cost control continues to drive top-line growth and margin expansion.

Negative Points

• Hurricane Milton affected fourth-quarter growth expectations, causing a 40-point decline.

• Online travel costs, excluding fuel, are expected to rise 6.2% to 6.7% for the full year, driven by higher non-cash compensation.

• The fourth quarter will see an increase in costs due to higher drying days and changes in costs from the third quarter.

• Despite strong demand, the company is facing challenges in managing cost pressures associated with continued investment in new ships and independent sites.

• RCL’s guidance for 2025 remains conservative, with moderate yield growth expected, reflecting the high rate set by unexpected yield growth in previous years.

The story continues

Q & A Highlights

Q: Can you provide a broader view on price trends compared to 2019 and how inflation may affect future yields? A: Jason Liberty, CEO: Compared to 2019, prices are up 25% for the fourth quarter and 26% for the year. This growth is driven by demand and the experience of cruises is becoming a common vacation product, not an investment. We continue to see strong consumer willingness to pay more, and we see no ceiling on this trend.

Q: Can you provide information about the financial investment for Perfect Day Mexico and the expected returns? A: Jason Liberty, CEO: We are in the process of planning Perfect Day Mexico. We bought the port for $292 million, including the surrounding area. We expect great returns from these private properties, focusing on providing high guest satisfaction and financial returns.

Q: What are the pillars to reach the earnings of $14 per share for 2025? A: Jason Liberty, CEO: The objective is based on the moderate growth of the products, the effective control of the costs, and the benefits of reduced interest costs due to the recent improvements of the provisions. The $14 target does not include share buybacks, although we have returned money through shares and buybacks.

Q: Can you elaborate on the higher demand trends and how they translate into the 2025 expansion? A: Jason Liberty, CEO: Demand is rising, allowing us to increase prices and build a strong book position for next year. Naftali Holtz, CFO: We use AI tools to improve productivity and build a strong book of business, which supports network expansion.

Q: How do you see the opportunity in the Gulf Coast and Texas markets with new places like Perfect Day Mexico? A: Michael Bayley, President and CEO of Royal Caribbean International: The Gulf Coast, including Texas, entered the bottom but has the same tendency to cruise as Florida. New locations like Perfect Day Mexico will allow us to offer competitive short-term products, improve our market presence and customer experience.

For a complete earnings call transcript, please see the full earnings call transcript.

This article originally appeared on GuruFocus.