Why Royal Caribbean Stock Climbed Today

Source The Motley Fool

Key Points

  • Royal Caribbean has a plan to win market share.

  • The cruise line's third-quarter results suggest it's on the right track.

  • Motley Fool Issues Rare "Total Conviction" Buy Alert ›

Shares of Royal Caribbean (NYSE:RCL) rallied on Tuesday after the cruise ship operator reported higher-than-expected profits and boosted its full-year earnings forecast.

Cruise ship sailing past silhouetted palm trees on a tropical ocean at sunset

Image source: Getty Images.

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An expanded market opportunity

Royal Caribbean's revenue rose 9% year over year to $5.6 billion in the third quarter.

"Our strategy to turn the vacation of a lifetime into a lifetime of vacations is propelling our business by leveraging our leading brands, differentiated experiences, loyalty platform, and technology capabilities to deepen guest relationships, increase vacation frequency, and capture a greater share of the growing global vacation market," CEO Jason Liberty said.

To that end, Royal Caribbean struck a deal to acquire a 50% interest in Sandals and Beaches Resorts in September, giving it access to 18 resorts across the Caribbean, with more under construction.

"By bringing together Sandals and Beaches' hospitality and Caribbean expertise with our global commercial reach, loyalty, and technology capabilities, we see meaningful opportunities to reach new guests, increase vacation frequency, and leverage our combined scale to create additional synergies and value over time," Liberty said.

All told, Royal Caribbean's adjusted net income jumped 12% to $1.8 billion, or $6.57 per share. That exceeded Wall Street's estimates, which had called for per-share profits of $6.38.

Raised guidance

These strong results prompted Royal Caribbean to lift its full-year profit target. Management now projects adjusted earnings per share of $17.85 to $17.95, up from a prior forecast of $17.73 to $17.87.

"Demand for our leading vacation experiences remains strong, and while it is still early, 2027 bookings are pacing ahead of historical levels at higher rates," Liberty said.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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