Shares of leading global cruise company Royal Caribbean Group (RCL +18.65%) are up 16% this week as of 2 p.m. ET on Thursday. The world's second-largest cruise provider reported record fourth-quarter earnings, leaving the market to take an optimistic view about the company's future. While Royal Caribbean technically "missed" Wall Street's Q4 earnings expectations, revenue and adjusted earnings per share (EPS) grew by 13% and 72%, respectively, during the quarter as the company realized streamlining efficiencies. However, what really stole the show was Royal Caribbean's 2026 guidance, where management projected double-digit sales and adjusted EPS growth, with capacity set to rise nearly 7%.
NYSE: RCL
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Is Royal Caribbean's future as bright as its Q4 results?
In addition to this stellar guidance, Chief Executive Officer Jason Liberty announced, "We experienced the best seven booking weeks in the company's history since the last earnings call," highlighting the unprecedented demand Royal Caribbean is seeing at the start of 2026. These record bookings follow a year in which net cruise costs (excluding fuel expenses) declined by 6%, creating an undeniably powerful one-two punch for the cruise line operator. Buoyed by these results, the company announced plans to double its fleet of Celebrity River Cruises ships to 20 by 2031 and to spend $5 billion on new initiatives in 2026 to capitalize on its growing demand.
Image source: Getty Images.
Best yet for investors, Royal Caribbean's stock has more than quintupled since the 2020 crash, yet it doesn't appear outrageously priced today. Royal Caribbean earned $6.3 billion in operating cash flow last year. Management expects to spend $1.8 billion on maintenance capex in 2026. This means that if Royal Caribbean quit building new ships (which we don't want it to, of course; this is just a valuation exercise), it would trade at roughly 22 times free cash flow (FCF) relative to its enterprise value of $100 billion. That is a pretty reasonable price compared to the broader market, especially given the company's plans for double-digit sales and earnings growth next year. That said, prospective investors need to embrace Royal Caribbean's cyclicality before buying.
