MW Younger Americans are flocking to cruises, and Royal Caribbean's stock is flying

By Tomi Kilgore

Royal Caribbean CEO repeats that Americans are 'wealthier than ever' and spending on travel experiences continues to grow

Shares of Royal Caribbean Group soared into record territory Tuesday, after the cruise operator extended its streak of quarterly earnings beats, and said it was seeing record bookings for future cruises to start the key Wave season.

Helping drive the strong results and outlook, Chief Executive Jason Liberty said younger Americans, particularly Millennial and Gen Z consumers, are spending more on travel experiences and are placing "significant value" on those that include visiting multiple destinations.

The company also announced it will start offering premium river cruises, to take advantage of a large, profitable market that most of its customers have said they would add an additional vacation to experience.

The stock $(RCL)$ shot up 12.3% in midday trading, to take it above Dec. 6 record close of $258.09, and to pace the S&P 500 index's SPX gainers.

That rally helped send the shares of fellow cruise operator Carnival Corp. $(CCL)$ up 7.4% toward a near four-year high, and Norwegian Cruise Line Holdings Ltd.'s stock up $(NCLH)$ 7.5%.

Meanwhile, shares of river-cruise provider and new Royal Caribbean competitor Viking Holdings Ltd. (VIK) fell 1.1%.

"The river market is dominated by Viking (50% share) at the moment, but remains highly fragmented outside of them, which should give Royal an opportunity," wrote analyst Conor Cunningham in a note to clients.

On the post-earnings call with analysts, CEO Liberty was very upbeat about fourth-quarter results and the booking outlook, as cruising provides exactly what consumers want in a vacation: more experiences, and at a cheaper price and with less headaches.

Cruising "remains an attractive value proposition and also leads in guest satisfaction" compared with other vacation alternatives, Liberty said, according to a FactSet transcript.

He said the biggest gains in the consideration of cruises for vacation are in Millennial and younger consumers.

Read: Royal Caribbean CEO explains why cruises are so popular.

Liberty repeated what he said in October, that "American households are wealthier than ever," as continued wage growth, low unemployment and surplus savings are driving strong consumer spending.

"We see positive sentiment from our customers in a macroenvironment that favors experiences over things," Liberty said. "As leisure and travel spend continue to grow, consumers plan to spend more on vacations and take more trips in the coming year."

For the company's fourth quarter, the company said results were driven by stronger pricing on close-in demand, which represents last-minute demand, as well as strength in customer spending while aboard cruise ships.

The company also provided an earnings outlook for the current quarter that was above Wall Street forecasts, while the full-year outlook was in line.

"Close-in demand in the fourth quarter remained strong on both a rate and volume basis," the company said. "Bookings have accelerated since the last earnings call, resulting in the best five booking weeks in the company's history."

For the quarter to Dec. 31, net income nearly doubled from a year before to $553 million, or $2.02 a share, from $278 million, or $1.06 a share. Excluding nonrecurring items, adjusted earnings per share rose to $1.63 from $1.25, compared with the FactSet consensus of $1.50.

That marked the 11th-straight quarter of bottom-line beats.

For the first quarter, the company projects adjusted EPS of $2.43 to $2.53, which is above the current FactSet consensus of $2.35.

"Wave season bookings are off to a record start, with booked load factors in line with prior years and at higher rates," the company said. Wave season is when cruise promotions peak, during the first quarter of the calendar year.

Revenue grew 12.9% to $3.76 billion, in line with expectations, as passenger ticket revenue was up 13.7% to $2.6 billion and onboard and other revenue rose 11.1% to $1.2 billion.

Net yields when excluding the impact of currency moves increased by 7.3%, well above expectations of a 6.1% improvement. This is a measure of profitability of capacity - and higher is better.

Load factor, or occupancy, was 108%, which indicates that three or more passengers were in some cabins.

For 2025, the company expects net yields to be up 2.5% to 4.5% and sees adjusted EPS of $14.35 to $14.65, which surrounds the current FactSet consensus of $14.45.

The stock has run up 30.7% over the past three months and soared 115.4% over the past 12 months. In comparison, the S&P 500 has tacked on 4.1% the past three months and advanced 23.9% the past year.

-Tomi Kilgore

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January 28, 2025 12:35 ET (17:35 GMT)

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