Royal Caribbean CEO Says 2027 Earnings Are Tracking Toward A '$20 Handle' Despite Fuel Costs
Jason Liberty says the 20% annual earnings growth target is still on track, with Sandals, buybacks and refinancing left out of the 2027 math.
Royal Caribbean Chairman and CEO Jason Liberty said on the company's third-quarter earnings call Tuesday that it remains on track for its 20% annual adjusted earnings growth target, which on the current forward fuel curve points to a "$20 handle" in 2027. The cruise operator also lifted its 2026 outlook to $17.85 to $17.95 per share, which Liberty said represents 14% growth.
Fuel is the swing factor
Royal Caribbean Group, which runs the Royal Caribbean, Celebrity Cruises and Silversea brands, is in the final year of its multi-year Perfecta financial program. Liberty said that at the spot fuel price when Perfecta was announced, the company would beat its 2027 earnings target by about $1 per share. Fuel rates have risen sharply this year, but he said the forward curve still leaves it on track for the 20% compound growth target.
Liberty also said the company has already reached its return-on-invested-capital target. CFO Naftali Holtz said the company now expects full-year fuel expense of about $1.35 billion, with 58% of fourth-quarter consumption hedged.
Holtz said the new 2026 range brings earnings back in line with the company's initial January expectations, despite fuel, currency and geopolitical hits. Liberty told a Barclays analyst who asked whether the consumer is tiring that the initial guidance midpoint of $17.90 matches the new one, which he called evidence of resilience.
What the $20 leaves out
A Stifel analyst asked whether the $20 figure excludes help from Sandals, buybacks and debt refinancing. Liberty said those items are not in the statement about next year, and that he expects Sandals' impact on 2027 to be immaterial. The company agreed to buy a 50% stake in Sandals & Beaches Resorts for about $3 billion, and Holtz said it expects the deal to close in early 2027.
Holtz said that Sandals will be booked as an equity-method investment, reported on a one-quarter lag, and that guidance will be updated after closing.
Bookings and the 2027 setup
Liberty said bookings since the last call rose in the mid-teens year over year, with 2027 sailings up in the high teens. He said the booked position for 2026 and 2027 is ahead of last year at record rates.
Third-quarter adjusted earnings were $6.57 per share, 26 cents above the midpoint of guidance, and revenue rose 9%. Net yields rose 0.6%, about 60 basis points (0.6 percentage points) above guidance.
For 2027, Holtz said capacity should grow 4.5%, with yield growth weighted to the second half because the first quarter faces about 200 basis points (2 percentage points) of structural headwinds, including dry-dock timing.
Formal 2027 guidance has not been issued; Holtz said the Sandals equity income will be added to guidance once the deal closes.
Sources
- Royal Caribbean (RCL) Q3 Earnings: How Key Metrics Compare to Wall Street Estimates — Yahoo Finance
- Royal Caribbean Lifts Full-Year Forecast After Posting Higher Quarterly Profit -- Update — MarketWatch
- Royal Caribbean: Q3 Earnings Snapshot — Associated Press
- Royal Caribbean Stock Jumps. Earnings Beat Is Good News for Cruise Fuel Fears. — Barron's
- Carnival vs. Royal Caribbean: Which Cruise Line Stock Has an Edge Now? — Yahoo Finance
