On Friday, Macquarie Equity Research reaffirmed its positive stance on Royal Caribbean (NYSE:RCL), maintaining an "Outperform" rating and raising its price target for the stock to $160 from $145 per share. The firm's confidence in the company stems from its perception of Royal Caribbean as a "best-in-class" player within the cruise industry, poised to capitalize on its operational leverage in the post-pandemic landscape.
The management of Royal Caribbean revised its full-year 2024 guidance upwards in late February, based on a robust Wave season—the period when cruises are often booked—which has led to the expectation of adjusted earnings per share (EPS) reaching double digits at the midpoint. The company also anticipates meeting all of its "Trifecta" goals within 2024, which include achieving triple-digit adjusted EBITDA per Available Passenger Cruise Days (APCD), a return on invested capital (ROIC) in the teens, and double-digit adjusted EPS.
The updated forecast for fiscal year 2024 and the first quarter was announced following a debt refinancing agreement and a record-breaking full-year guide from the earnings call in February. The full-year adjusted EPS is now projected to be between $9.90 and $10.10, compared to the previous estimate of $9.50 to $9.70. This increase is attributed to an approximate 100 basis points rise in net yield growth on top of the previously expected 5.25% to 7.25% increase. The improved full-year guidance suggests an additional $0.40 in adjusted EPS, with $0.15 of this expected to contribute to the first quarter.
Management has also provided updates on bookings, indicating that the initial five weeks of the Wave season saw unprecedented demand, surpassing the same period in 2023. In terms of performance, the second half of 2024 is expected to exceed the first half. The booked position for all key products is currently pacing ahead of the previous year in both rate and volume, and onboard spending remains strong due to higher customer participation at increased prices.
Finally, Macquarie Equity Research has adjusted its model for Royal Caribbean's EPS from 2024 to 2026, which now reflects figures of $10.00, $11.48, and $13.08, respectively. These revisions are driven by the sustained momentum in bookings and pricing, the introduction of new ships, and robust onboard spending. The positive adjustments are somewhat tempered by a slight increase in projected cruise operating costs.