Macquarie Equity Research reiterated its positive view for Royal Caribbean (RCL) on Friday, maintaining its “Outperform” rating and raising the company’s stock price target from $145 to $160. The firm’s confidence in Royal Caribbean stems from its expectation that the company will benefit from operational efficiency in the cruise industry following the pandemic.
The management of Royal Caribbean updated its 2024 earnings forecast at the end of February after a strong Wave season, during which cruise bookings are typically made. This led to the expectation that the company’s adjusted earnings per share (EPS) will reach double-digit figures at the midpoint of the forecast range. Royal Caribbean also expects to achieve its “Trifecta” targets by 2024, which include reaching triple-digit adjusted EBITDA per Available Passenger Cruise Day (APCD), return on invested capital (ROIC) in the young percentage range, and double-digit adjusted EPS.
The revised outlook for the fiscal year 2024 and the first quarter was provided following the company entering into a debt refinancing agreement and reporting record full-year earnings estimates during its February earnings call. The company now expects full-year adjusted EPS to be between $9.90 and $10.10, an increase from the previous range of $9.50 to $9.70. This upward adjustment is due to an expected approximately 100 basis points increase in net yield growth, in addition to the previously anticipated growth of 5.25% to 7.25%. The improved full-year forecast translates to an additional $0.40 increase in adjusted EPS, with $0.15 of this expected to occur in the first quarter.
Company executives also shared updates on cruise bookings, noting exceptional demand exceeding the same period in 2023 during the first five weeks of the Wave season. The second half of 2024 is expected to outperform the first half. The reservation status for all major products is currently showing progress compared to the previous year in both price and quantity, and revenue from onboard purchases remains high due to increased customer engagement at higher prices.
In conclusion, Macquarie Equity Research has updated its EPS forecasts for Royal Caribbean from 2024 to 2026 and now forecasts figures of $10.00, $11.48, and $13.08 for each year. These adjustments are based on ongoing strong performance in bookings and pricing, addition of new ships to the fleet, and significant onboard spending. However, these positive forecasts are somewhat offset by the expected modest increase in cruise operating expenses.
source: tr.investing.com/ prepared by Melisa Beğiç