Royal Caribbean Raises Annual Profit Forecast, Hoping for Steady Demand

Royal Caribbean raised its annual profit forecast on Tuesday, banking on resilient demand for its luxury destinations, even as the cruise operator faces pressure from higher fuel costs.

The company forecast current-quarter profit below estimates, sending its shares down about 7% in early trading. The stock has gained about 53% this year.

Escalating Israel-Iran tensions as well as a recently announced trade deal between the U.S. and the European Union have boosted fuel costs and price volatility, keeping cruise operators on edge.

Despite the macroeconomic challenges and uncertainty around tariffs, Royal Caribbean's booking trends rose from the prior quarter, particularly for close-in sailings, as its exclusive cruise deals and limited offers helped pull in travelers.

The company has also been investing in boosting travel options for high-end, seasoned cruisers and new customers alike with private islands and fresh cruise itineraries.

"The strong demand we are seeing across our new ships and land-based destinations reinforces that our strategy is working and resonating with today's traveler," CEO Jason Liberty said.

Royal Caribbean expects costs to rise by about 230 basis points in the third quarter, mainly on the back of the delivery timing of the luxury cruise ship "Star of the Seas" and some expenses moving from the second quarter.

It expects third-quarter adjusted earnings per share of $5.55 to $5.65, below analysts' estimates of $5.83, per data compiled by LSEG.

In June, peer Carnival Corp lifted its annual profit forecast and delivered an upbeat quarter with the highest margins in about 20 years, saying sea-based vacations remained more affordable than land-based options.

For the full year, however, Royal Caribbean expects adjusted profit per share of $15.41 to $15.55, compared with its prior forecast of $14.55 to $15.55.

It earned $4.38 per share for the second quarter ended June 30, beating estimates of $4.09.

(Reuters)