Why Royal Caribbean Stock Crushed it in October
Investors were more than eager to hop aboard Royal Caribbean‘s (RCL +6.38%) stock last month. The cruise company had fine potential going into its peak summer sailing season and took full advantage, as evidenced by its strong third-quarter results published near the end of the month. That was bookended by new, upbeat analyst takes, and the combination of these positive factors sent the stock to a monthly gain of nearly 16%.
Full speed ahead
In the run-up to that earnings release, which occurred four days shy of Halloween, several prognosticators made bullish adjustments to their Royal Caribbean takes. The most meaningful change came from Jefferies (JEF +5.38%), which upgraded its recommendation on the stock to buy from hold. It also lifted its price target to $330 per share from $305.
Image source: Getty Images.
According to reports, Jefferies wrote that it expects to post a higher net yield than previously estimated (net yield is essentially how much revenue, net of certain costs, a cruise operator earns per available berth on its ships). Jefferies has increased its forecast for Royal Caribbean’s 2027 net yield to 3.3%, up from 2.9%, citing higher occupancy and increased onboard spending.
That was a good call, because Royal Caribbean delivered the goods when it reported those third-quarter results on Oct. 27.
Revenue for the period rose by a robust 9% year over year to $5.6 billion, while non-GAAP (adjusted) net income cruised even higher with a 12% increase to $1.8 billion. The former was basically in line with analyst estimates, but the company notched a convincing beat on the collective pundit forecast for adjusted profitability.
While we’re on the subject of earnings beats, Royal Caribbean also topped the analyst consensus for full-year 2026 adjusted earnings per share (EPS). The company’s guidance for the metric, by the way, was raised to $17.85 to $17.95 per share, up satisfyingly from the previous range of $17.73 to $17.87.
RCL – Royal Caribbean Cruises
$333.15+$19.98 (+6.38%)
NYSE · As of 4:00 PM ET 11/04/26
Eager clientele
After those third-quarter figures were published, Royal Caribbean closed out October by receiving a series of price target raises from other analysts. Prognosticators from Citigroup (C +1.65%) and Wells Fargo (WFC +2.22%) were among those doing the raising, while Freedom Broker’s Manuchekhr Narzulloev took the extra step of upgrading his recommendation to buy from hold.
Even a war centered around a crucial sea lane (the Strait of Hormuz) can’t keep determined travelers away from Royal Caribbean cruises these days. The company’s stock has done well so far this year — not only in October — however, I think there’s more room to grow. Its forward P/E is barely above 15, which seems awfully inexpensive for a company that just raised its earnings guidance and is in the midst of a sustained travel boom.
Royal Caribbean’s equity looks rather attractive just now, in my view.
Wells Fargo is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group. The Motley Fool has a disclosure policy.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.