Royal Caribbean Group (RCL) reported first-quarter earnings that surpassed Wall Street expectations, but the cruise operator tempered its full-year outlook due to rising fuel expenses. The company now projects 2026 adjusted earnings per share in the range of $17.10 to $17.50, down from its prior forecast of $17.70 to $18.10. The revision reflects an anticipated fuel bill of approximately $1.35 billion for the year, with 59% of remaining fuel needs hedged to mitigate price volatility.
Strong Q1 Performance
For the quarter ended March 31, Royal Caribbean posted net income of $941 million, or $3.48 per share, compared with $730 million, or $2.70 per share, in the same period last year. Adjusted earnings came in at $3.60 per share, comfortably above the $3.19 consensus estimate from analysts surveyed by LSEG. Revenue rose 11% year-over-year to $4.5 billion, driven by a 12% increase in guest counts to 2.5 million and an 8% capacity expansion. Load factor reached 109%, indicating ships were filled beyond standard capacity, supported by higher ticket prices, last-minute bookings, and increased onboard spending.
Bookings Rebound After Geopolitical Headwinds
The company noted a temporary slowdown in bookings for Mediterranean and West Coast Mexico itineraries during March and early April, attributing the dip to geopolitical disruptions. However, bookings have since recovered, signaling resilient demand. “Our strong first-quarter results and record WAVE season demonstrate the broad appeal of our brands,” said CEO Jason Liberty. “Demand for our experiences continues to be strong.”
Market Reaction and Sector Impact
Investors responded positively to the earnings beat and demand commentary, sending Royal Caribbean shares up 8.7% to $276.06 by late morning trading on Thursday. The stock had earlier climbed as much as 10.8%. The optimism spilled over to rivals, with Carnival Corp. (CCL) advancing 5.1% and Norwegian Cruise Line Holdings (NCLH) gaining 3.7%. Analysts view Royal Caribbean’s results as a positive read-through for the broader cruise industry.
Cost Pressures and Outlook
Despite the strong quarter, fuel costs remain a significant headwind. For the second quarter, Royal Caribbean expects adjusted EPS of $3.83 to $3.93, with fuel costs pegged at $346 million and hedges covering 60% of usage. The company also forecast full-year net yields—revenue per available capacity—to rise 2.3% to 3.3% on a reported basis. CFRA Research analyst Alex Fasciano cautioned that “sustained higher fuel costs” could threaten profitability, though he noted the company might adjust itineraries to mitigate the impact.
Capital Expenditures and Share Buybacks
Royal Caribbean continues to invest aggressively, projecting about $5 billion in capital expenditures this year, primarily for new ships and land-based destination developments. The company expects delivery of Legend of the Seas in the second quarter. During the first quarter, Royal Caribbean repurchased 2.9 million shares at a cost of $836 million, leaving $1.0 billion remaining under its buyback program.
Operational Reach and Risks
The company’s portfolio includes Royal Caribbean International, Celebrity Cruises, Silversea, and a stake in TUI Cruises, with a fleet visiting approximately 1,000 ports across all continents. This global footprint exposes it to a range of risks, including fuel price fluctuations, currency movements, port logistics, and airline disruptions that could affect passenger travel to key regions like Europe.
