Shares of Royal Caribbean Cruises Ltd. RCL have gained 46.9% over the past six months, outperforming the 29.5% rise in the Zacks Leisure and Recreation Services industry. The stock has also surpassed the broader Zacks Consumer Discretionary sector's growth of 16.2% and the S&P 500 index’s 7.6% rally during the same period. The stock closed at $237.66 yesterday, below its 52-week high of $277.08 but well above its 52-week low of $121.18.
Royal Caribbean is capitalizing on strong demand for cruising, with both loyal guests and new travelers driving robust booking trends. Strategic pricing measures, coupled with higher consumer spending on onboard services and pre-cruise purchases, are contributing to revenue growth. The company’s diverse fleet and expanding vacation offerings further strengthen its position, benefiting from an improving global travel environment.
The RCL stock has outperformed some other industry players in the past six months, including Norwegian Cruise Line Holdings Ltd. NCLH, Carnival Corporation & plc CCL and OneSpaWorld Holdings Limited OSW. During the said time frame, shares of NCLH and CCL have rallied 42.4% each, and OSW has gained 21.7%.
RCL Stock’s Six-Month Price Performance
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Strong Booking Trends & Pricing Strategy Aid Royal Caribbean
The company is seeing strong booking volumes and a rise in consumer spending, reflecting a positive demand and pricing environment. The load factor for the fourth quarter of 2024 stood at 108%, with net yield growth surpassing expectations due to higher pricing across all key products and strong onboard revenues. The company continues to expand its booked advance purchase deposits from the previous year, strengthening its pricing strategy.
Royal Caribbean remains optimistic about the demand and pricing outlook for 2025, with load factors tracking in line with prior years and at higher rates. A strong booking position from both pricing and volume standpoints supports continued yield growth. North America remains a key market, with 80% of guests expected to be sourced from the region. As of Dec. 31, 2024, customer deposits reached $5.5 billion from $5.31 billion in the prior-year period.
Expanding Fleet to Enhance RCL’s Offerings & Profitability
Royal Caribbean continues to expand its fleet with ship launches and enhanced onboard experiences, aiming to strengthen its market position and drive higher yields. The company is adding a fourth Icon-class ship in 2027, following the success of Icon of the Seas and the anticipation for Star of the Seas. Other upcoming launches include Celebrity Excel in late 2025 and the seventh Oasis-class ship in 2028.
Beyond fleet expansion, RCL is investing in private destinations to enhance guest experiences. Projects include the Royal Beach Club Paradise Island in 2025 and Royal Beach Club in Cozumel in 2026. The company also plans to introduce Perfect Day Mexico in 2027 and a Silversea hotel in Puerto Williams, Chile, by 2026. These additions support long-term growth by attracting customers and increasing guest spending.
Strong Demand & Capacity Expansion to Support 2025 Growth
Strong demand and capacity expansion continues to shape Royal Caribbean’s growth trajectory, supported by ship additions, regional deployment strategies and disciplined cost management. The company expects a 5% capacity increase in 2025, driven by the introduction of Star of the Seas and Celebrity Xcel, along with the full-year contribution of Utopia of the Seas and Silver Ray.
RCL's disciplined approach, combining moderate capacity growth, yield expansion and cost efficiency, is expected to drive 23% earnings growth in 2025. Yield growth is projected between 2.5% and 4.5%, supported by new and existing ships.
Royal Caribbean continues to strengthen its presence in the Caribbean, with more than 70% of guests set to visit a private destination in 2025. This percentage is expected to rise to 90% by 2027 with the addition of Royal Beach Club locations in Nassau and Cozumel, as well as Perfect Day Mexico. Icon and Utopia of the Seas are performing above expectations, supporting strong booking trends.
Europe will account for 15% of the total capacity, reflecting a 5% increase from the previous year. Alaska will make up 6%, supported by high-performing ships such as Celebrity Edge, Quantum Class vessels and Silver Nova. Demand in both regions remains strong, reinforcing the company's broader deployment strategy.
Stable Financial Position & Enhancing Shareholder Returns
Royal Caribbean continues to strengthen its financial position while enhancing shareholder value through capital allocation and disciplined balance sheet management. At the end of 2024, the company maintained an unsecured balance sheet with leverage at a low 3X, aligning with its investment-grade credit targets. Royal Caribbean expects to reduce leverage to mid-to-high two turns by the end of 2025 through capital structure optimization and cash flow improvements. Ongoing initiatives include managing debt maturities and identifying opportunities to lower capital costs.
On Feb. 12, 2025, the company announced a 36% increase in its quarterly dividend, raising it to 75 cents per share. Additionally, the board of directors approved a $1-billion share repurchase program over the next 12 months. These measures reflect Royal Caribbean’s commitment to shareholder returns while maintaining financial flexibility for growth.
RCL Shares Trade at a Discount
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The company is currently valued at a discount compared with its industry on a forward 12-month P/E basis. RCL’s forward 12-month price-to-earnings ratio stands at 15.53, lower than the industry’s 19.13 and the S&P 500's 22.23.
Positive Fundamentals
The company demonstrates solid fundamentals, with a strong VGM Score of A, supported by an impressive Value and Growth Score of B, respectively, alongside a Momentum Score of A.
RCL’s EPS Estimates & Analyst Sentiment
Wall Street analysts remain optimistic about Royal Caribbean’s earnings potential. Over the past 30 days, earnings estimates for 2025 have been revised upward, as shown below, indicating 26.2% year-over-year growth.
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Is it Time to Buy Royal Caribbean’s Stock?
Royal Caribbean is well-positioned for continued growth, driven by strong booking trends, fleet expansion and disciplined financial management. The company remains focused on enhancing guest experiences, increasing profitability and strengthening its market presence through ship launches and private destinations. Efforts to optimize capital structure and shareholder returns support its long-term strategy.
This Zacks Rank #2 (Buy) company remains an attractive investment, trading at a discount compared with its industry peers. Analysts anticipate solid earnings growth, supported by a favorable pricing environment and rising consumer demand. With a strong financial foundation and positive market conditions, Royal Caribbean presents a compelling opportunity for investors seeking long-term value in the travel and leisure sector.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
