Royal Caribbean's Q3 EPS Beats, But Goldman Sachs Cautions On Rising Q4 Costs And EPS Impact

Royal Caribbean Cruises Ltd. RCL shares are trading higher on Tuesday. The company reported mixed third-quarter results today.

Revenue grew 17.5% year-over-year to $4.89 billion, missing the consensus of $4.90 billion, while adjusted EPS of $5.20 was above the consensus of $5.03.

The company sees fourth-quarter net yields increase 5.1% to 5.6% in constant currency. RCL sees adjusted EPS of $1.40 – $1.45 against the estimate of $2.28.

Goldman Sachs analyst Lizzie Dove writes that looking ahead, the primary disappointment is expected to be in the fourth-quarter guidance, with reported net yield growth projected at 5.3% to 5.8%, slightly below our expectation of 5.9%.

This forecast already considers the impact of Hurricane Milton, estimated at approximately 40 basis points, which would adjust the midpoint to 5.95%, added the analyst.

Additionally, Dove anticipates a greater emphasis on costs, as the fourth-quarter guidance of 7.8% to 8.3% year-over-year (reported) exceeds Goldman Sachs and Street estimates of 5.6% to 5.8%.

The analyst says that the fourth-quarter adjusted EPS guidance incorporates $0.24 of headwinds—one-third from Hurricane Milton and two-thirds due to the timing of cost shifts from the third quarter and increased non-cash stock compensation.

Adjusting for the timing shift in costs from third-quarter diminishes the EPS beat, which may not meet investor expectations, adds the analyst.

However, Dove says that the fundamentals remain robust, with demand and pricing conditions improving since the last earnings call and strong demand anticipated for 2025.

The analyst anticipates that long-term estimates for the Street to rise as a result, with current 2025 EPS estimated at $14.04 and the Street’s at $13.70.

Investors can gain access to the stock via Defiance Hotel, Airline, and Cruise ETF CRUZ and Invesco Leisure and Entertainment ETF PEJ.

Price Action: RCL shares are up 3.36% at $210.35 at the last check Tuesday.

Image via Unsplash

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