What happened
At long last -- some good news for cruise stock investors.
For more than a month -- ever since Carnival (CCL +0.68%) spooked the market with a big earnings miss in late September -- investors have worried that when Norwegian Cruise Line Holdings (NCLH 0.81%) and Royal Caribbean (RCL +0.45%) got around to reporting their earnings, the results would be just as bleak.
Turns out, they needn't have worried.
On Thursday morning, Royal Caribbean reassured investors that things aren't quite as bad as they might have been. With earnings of $0.26 per share (adjusted) on sales of $2.99 billion for the quarter, Royal Caribbean sailed right past analysts' consensus forecasts for $0.19 per share in profits on sales of $2.97 billion.
In short, it "beat earnings," and as a result, not only did Royal Caribbean's stock price gain 6.2% as of 12:55 p.m. ET, but Norwegian Cruise stock rose 3.9%, and even Carnival enjoyed a 2.4% gain.
NYSE: RCL
Key Data Points
So what
That's the good news -- but unfortunately, not all of Royal Caribbean's news was good. For one thing, when calculated according to generally accepted accounting principles (GAAP), Royal Caribbean's earnings were only half as strong as the adjusted number it proffered after factoring out one-time items. Its GAAP profits were only $0.13 per share.
Granted, Royal Caribbean said that its load factor (the number of passengers booked versus the number of total berths on its ships) hit 96% in Q3, and looking ahead to 2023, "all quarters are currently booked well within historical ranges [and] at record pricing." But in Q4, Royal Caribbean expects to see revenue decline about 13% to $2.6 billion from the $3 billion it collected in Q3.
And between unfavorable currency exchange rates, high fuel prices, and other costs, management fears Royal Caribbean will probably lose between $1.30 per share and $1.50 per share in the current quarter.
Now what
No matter. While the Q4 outlook may not be great, in Q3, Royal Caribbean earned an honest-to-goodness GAAP profit -- and that in and of itself is something to cheer about. It was, in fact, the only quarterly GAAP profit that any of the three major cruise line companies has been able to report since Q4 2019, the last quarter before the pandemic struck.
And that means there's now hope for the rest of the industry as well.
Indeed, as early as Q1 2023, analysts forecast that Royal Caribbean will bounce back from its anticipated Q4 loss and be back in the black again -- and consistently profitable as far out as the eye can see. That's better than the outlook for Carnival -- the consensus on Wall Street is that it will keep losing money through at least the second quarter. It's better than what analysts foresee for Norwegian Cruise as well. According to analyst forecasts compiled by S&P Global Market Intelligence, it will probably keep losing money through Q1.
And speaking of Norwegian Cruise, it just announced that it will deliver its Q3 earnings report on Nov. 8. Tune in then to find out if it, too, can pull a GAAP profit rabbit out of its hat.
