Royal Caribbean May Have Swung Back to Loss in Q4

Key Takeaways

  • Royal Caribbean will likely post fourth-quarter 2022 adjusted EPS of -$1.37 vs. -$5.33 for the prior-year quarter.
  • Revenue is expected to more than double to $2.6 billion.
  • The company faces lingering debt from when it suspended operations earlier in the pandemic.
  • Booking rates have increased, but concerns about inflation and a possible recession, as well as COVID, remain.

Royal Caribbean Group (RCL), the second-largest cruise company by 2021 revenue, is expected to return to a loss in the final quarter of 2022 after posting its first profit in several years in the third quarter, even as revenues almost triple amid rebounding cruise demand.

The cruise line likely will say that net losses reached $355.8 million, for adjusted losses of $1.37 per share, according to estimates compiled by Visible Alpha. Both are narrower than the prior-year quarter. Revenue could increase 165% to $2.6 billion. Royal Caribbean reports results for the fourth quarter before markets open on Feb. 7.

Cruise companies, hit hard by COVID shutdowns, have recently noted an uptick in bookings on smaller luxury vessels as most ports worldwide have reopened. While hesitation due to inflation and a potential recession linger, Morgan Stanley has said reservation patterns industry-wide are returning to pre-pandemic norms, including longer booking windows. Still, passenger concerns about COVID remain a headwind after a number of high-profile outbreaks on cruise lines in years past.

As the industry rebounds, Royal Caribbean has said it is well-positioned, with bookings for 2023 so far coming in at historic ranges and prices. Nonetheless, the company does have to contend with a debt load that swelled to $23 billion when it suspended operations early in the pandemic. Royal Caribbean recorded $352 million in interest expenses for the third quarter and it expects a similar figure in the last months of the year.

Royal Caribbean shares have rallied since last summer. They are down about 14% over the last year, compared with a 16% drop for the S&P 500 Consumer Discretionary Index.

Source: TradingView.
Royal Caribbean Key Stats
  Estimate for Q4 FY 2022 Actual for Q4 FY 2021 Actual for Q4 FY 2020
Adjusted Earnings Per Share ($) -1.37 -5.33 -6.09
Revenue ($B) 2.6 1.0 0.03

Source: Visible Alpha

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