Key Takeaways

  • Analysts expect adjusted earnings of $0.33 per share vs. a loss of $4.91 a share in Q3 2021.
  • The cruise line’s 64-ship fleet is fully operational again, serving all its pre-pandemic destinations other than China.
  • Demand and pricing have recovered, though Royal Caribbean remains saddled with debt after halting cruises during the pandemic.

Royal Caribbean Cruises Ltd. (RCL) is expected to post its first quarterly profit in almost three years as revenue surges seven-fold to the highest in 12 quarters amid a rebound in cruise demand.

The company probably swung to a profit of 33 cents a share from a $4.91 per-share loss a year ago, its first positive result since just before the pandemic, according to the average estimate of analysts tracked by Visible Alpha. Revenue is expected to rise to $3 billion, the highest since the third quarter of 2019. The cruise line’s occupancy rate is expected to recover to 93%, more than double the 36% level in the year-ago quarter.

Demand for cruises is expected to remain healthy following their suspension for more than a year due to COVID-19. Royal Caribbean said in July that bookings for the second half of this year were below historical ranges as measured by occupancy, though at higher prices than before the pandemic. The company said bookings for next year were at historic ranges and at record prices.

It’s not all a pretty picture. Royal Caribbean will probably struggle to reduce its $23 billion debt load, which ballooned as it suspended operations during the pandemic. In August, the company sold $1.25 billion of junk bonds and sold more debt in October. The company borrowed at rates as high as 11.625%.

Royal Caribbean shares fell 41% in the past year, compared with a 16% drop in the S&P 500 index.

Source: TradingView

Royal Caribbean Earnings History

Royal Caribbean posted at least four years of quarterly profit growth, defined by adjusted earnings per share, until the last quarter of 2019. It then lost money for 10 straight quarters through this year’s second period.

Royal Caribbean’s revenue rose for at least 16 straight quarters through the end of 2019, then declined for six quarters in a row through the second quarter of 2021, when it staged a rebound.

Royal Caribbean Key Stats

 Estimate for Q3 FY 2022Q3 FY 2021Q3 FY 2020
Earnings Per Share ($)0.33-4.91-5.62
Revenue ($B)3.00.5-0.03

Source: Visible Alpha

The Key Metric

Royal Caribbean calculates its occupancy, also known as load factor, by dividing the number of passenger cruise days by available passenger cruise days. Royal Caribbean’s occupancy was consistently above 100% in the years before the COVID-19 pandemic because some cabins were shared by three passengers. Occupancy fell to a quarterly low of 28% last year and recovered to 82% in this year’s second quarter. Royal Caribbean’s fleet of 64 cruise ships incurs major financing and operating costs. As a result, high occupancy rates are key to the company’s profitability.

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