Royal Caribbean Cruises (RCL 6.08%) has treated investors quite well lately, with the cruise line stock outperforming the broader market in 2025. The first article in this series explored the recent history of the cruise business and Royal Caribbean's place in it. Here, you'll get a closer look at the financial performance that has helped support Royal Caribbean shares for the past five years while still leaving shareholders more room to run higher.
Royal Caribbean's V-shaped recovery
Throughout the 2010s, Royal Caribbean was able to grow its business slowly but steadily, with solid gains in revenue and net income. However, that all changed in 2020, when the pandemic's impact slashed the cruise company's sales by more than 80%. Royal Caribbean had to endure another year of closures in 2021, and it was only in 2022 that reversals of government travel restrictions allowed the business to start recovering. During the three years from 2020 to 2022, Royal Caribbean lost over $13 billion.
Image source: Getty Images.
Unlike peers Carnival (CCL 6.08%) and Norwegian Cruise Line Holdings (NCLH 2.71%), however, Royal Caribbean was largely able to get through the early pandemic period by raising debt. Royal Caribbean issued more than $12 billion in debt instruments during that three-year stretch, but the important thing for shareholders was that the company was able to do so without lenders insisting on massive dilutive sales of newly issued stock at bargain-basement prices. Royal Caribbean did end up offering about $3 billion in new shares, but that only led to about a 25% increase in its outstanding diluted share count from 2019 to 2023. By contrast, Carnival saw its share count jump 80%, and Norwegian's has more than doubled in the past five years.
Sunny days are here again
Travelers had plenty of pent-up demand after travel restrictions ended, and throngs of would-be cruise customers helped Royal Caribbean recover quickly. By 2023, the cruise operator had set new records for revenue, and it had returned to profitability despite carrying more debt on its balance sheet. Margins continued to improve, leading to record earnings of $2.88 billion in 2024. Over the past 12 months, Royal Caribbean has taken its profit potential to the next level, topping the $4 billion in net income.
NYSE: RCL
Key Data Points
Even years after travel conditions largely returned to normal, Royal Caribbean still enjoys strong demand. Its load factor for the third quarter of 2025 was 112%, indicating strong bookings. Revenue of $5.14 billion was up 5% year over year, and modest gains in key business metrics helped adjusted earnings rise more than 10% to $5.75 per share.
Best of all, the recovery in Royal Caribbean's business has helped it start to right the ship in terms of paying down some of the obligations it incurred during the early years of the pandemic. Free cash flow has returned to positive territory, amounting to $2 billion in 2024 and a little over that amount over the past 12 months. During 2023 and 2024, Royal Caribbean paid down roughly $3.75 billion of its long-term debt. Yet the company has used a balanced approach toward capital allocation, having restored its dividend and even making modest share repurchases recently.
Ending 2025 with strong momentum
In its most recent quarterly financial release, Royal Caribbean boosted its full-year guidance for 2025. The company now expects between $15.58 and $15.63 per share in adjusted earnings for the year. With the stock recently trading around $280, that implies a forward earnings multiple of well below 20. That's a fairly attractive valuation in current market conditions, even focusing solely on what Royal Caribbean has already accomplished in its turnaround efforts.
The real question for investors, though, is whether Royal Caribbean can keep moving forward. That's an area to examine more closely in the final installment of this three-part series on Royal Caribbean.
