Royal Caribbean Beats Earnings Estimates, Hikes Guidance. Why the Stock Is Tumbling.

Royal Caribbean International’s Icon of the Seas in Miami, Fla. (Courtesy Royal Caribbean)

Key Points

• Royal Caribbean exceeded third-quarter earnings expectations, reporting adjusted earnings of $5.75 on $5.14 billion in revenue.
• The company raised its full-year EPS guidance to between $15.58 and $15.63, which was below the analyst consensus of $15.70.
• Despite strong performance, the stock fell 9.6% in Tuesday trading, having previously gained 39% this year.

Royal Caribbean beat earnings expectations and hiked its full-year guidance following strong cruise demand and lower costs in the third quarter.

But investors wanted more from its guidance and the stock, which has had a good year up to now, tumbled 9.6% in Tuesday trading.

The cruise operator reported adjusted earnings of $5.75 on revenue of $5.14 billion. Analysts were expecting adjusted EPS of $5.69 on revenue of $5.2 billion, according to FactSet estimates.

However, Wall Street was looking for more from Royal Caribbean’s full-year profit outlook—even as the company increased its guidance. It now expects EPS of between $15.58 and $15.63 but that was below analysts’ consensus of $15.70.

“Looking ahead, while it’s still early in the planning process, our strong booked position gives us confidence for 2026 and beyond,” CEO Jason Liberty said.

Heading into earnings, the stock was up 39% this year—outperforming Carnival’s 18% jump and Norwegian Cruise Line Holdings’ 9% drop.

Liberty spoke with Barron’s following the earnings report, and highlighted the fact that Royal Caribbean is still seeing strong demand across its brands.

Concerns about the health of the consumer have been growing, given the cumulative impact of inflation and uncertainties including the government shutdown, but Liberty note that “cruises, besides making for an incredible vacation experience, are an incredible value for the money. If you understand what a cruise is like, that’s not only difficult to replicate on land but impossible to replicate for the money spent.”

Liberty says that bookings are robust across its offerings, from the more family oriented flagship brand to the higher-end Celebrity and Silver Sea cruises and expeditions, and that reflects the public’s ongoing commitment to spending on memories over time at the mall. “People already have enough stuff, and they want to make sure they’re building memories with friends and family.”

The company’s new offering Royal Beach Club Santorini, announced along with earnings, are another step toward offering exclusive events for passengers, even in crowded destinations. It’s a way for people to experience a “bucket-list destination…with less congestion.”

Write to Callum Keown at callum.keown@barrons.com