Royal Caribbean Shares Sink as New Mega-Ship Costs Bite Into Profits

Wall Street hits the panic button—again.

Royal Caribbean's stock just took a nosedive after analysts flagged the eye-watering costs of its newest floating city (sorry, 'cruise ship'). The market's allergic to anything that might dent short-term margins—even if it means dominating the luxury travel sector by 2030.

Cue the institutional hand-wringing: 'But muh earnings per share!' Meanwhile, crypto traders are busy stacking satoshis while traditional finance frets over steel and champagne budgets.

Key Takeaways

• Royal Caribbean said its current-quarter profit is expected to be negatively impacted by charges associated with its newest ship.
• The cruise line operator anticipates net cruise costs to rise because of the timing of the delivery of its Star of the Seas as well as cost timing shift from the second quarter.
• The news offset better-than-expected second quarter profit on an increase in passengers carried.

Royal Caribbean Group (RCL) shares fell 5% Tuesday when the cruise line operator issued a worse-than-expected outlook on higher costs for its newest ship.

The company sees current-quarter adjusted earnings per share (EPS) of $5.55 to $5.65, while analysts surveyed by Visible Alpha were looking for $5.83. It anticipates net cruise costs, excluding fuel, per available passenger cruise days will be up 6.4% to 6.9%, with about 230 basis points of that "attributable to the timing of delivery of Star of the Seas, and the cost timing shift from the second quarter."

The outlook offset strong second-quarter profit. Royal Caribbean posted adjusted EPS of $4.38, while the consensus Visible Alpha estimate called for $4.10. Revenue ROSE 10% year-over-year to $4.54 billion, just short of forecasts.

Capacity was up nearly 6%, and the number of passengers carried increased 10% to 2.3 million. The company noted that bookings jumped since the Q1 earnings report, especially for close-in sailings, which boosted results. 

"Demand for our portfolio of brands and our industry-leading experiences continues to accelerate," CEO Jason Liberty said.

Even with today’s drop, Royal Caribbean Group shares are still about 45% higher year-to-date.

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