Returns Are Gaining Momentum At Royal Caribbean Cruises (NYSE:RCL)
Sunday, Jan 5, 2025 6:13 am ET

As we step into the new year, it's time to take a closer look at Royal Caribbean Cruises (NYSE:RCL) and the momentum it's building. This cruise line giant has been making waves in the industry, and its financial performance is a testament to its success. Let's dive into the numbers and see what makes Royal Caribbean a compelling investment opportunity.
Royal Caribbean's Return on Capital Employed (ROCE) has been on a steady upward trajectory over the past five years. In 2019, the company's ROCE stood at 9.1%, but by 2024, it had climbed to an impressive 15%. This significant improvement can be attributed to several factors:
1. Increasing Earnings Before Interest and Tax (EBIT): Royal Caribbean's EBIT has grown substantially over the past five years. In the trailing twelve months to September 2024, the company reported an EBIT of US$4.1 billion, compared to US$2.5 billion in 2019. This increase in EBIT has contributed to the improvement in ROCE.
2. Growth in Capital Employed: Royal Caribbean's capital employed has also increased over the past five years. As of September 2024, the company's total assets minus current liabilities stood at US$37 billion, compared to US$27 billion in 2019. This increase in capital employed has also contributed to the improvement in ROCE.
3. Improved Yield and Cost Management: Royal Caribbean has successfully managed to increase its yields and control its costs. In the third quarter of 2024, the company reported a 13.4% increase in Gross Margin Yields and a 7.9% increase in Net Yields compared to the same period in 2023. Additionally, the company has managed to keep its Gross Cruise Costs per Available Passenger Cruise Days (APCD) increase to 1.3% as-reported, compared to the third quarter of 2023.
These factors, combined with the company's focus on reinvesting capital at increasing rates of return, have contributed to the improvement in Royal Caribbean's ROCE over the past five years.

Royal Caribbean's commitment to innovation and new product launches has been a significant driver of its success. The company's Icon Class of ships, set to debut in 2025, is expected to revolutionize the cruise industry with its cutting-edge technology and unparalleled guest experiences. Additionally, Royal Caribbean's expansion into new markets, such as Asia, and its focus on recurring revenue streams have further bolstered its competitive position.
Royal Caribbean's market share in the cruise industry has been steadily increasing, and its strong financial performance has positioned it as a leader in the sector. The company's ability to generate strong returns on capital employed, coupled with its commitment to innovation and cost control, has enabled it to maintain its competitive advantage.
In conclusion, Royal Caribbean Cruises (NYSE:RCL) is a compelling investment opportunity for those looking to capitalize on the growing momentum in the cruise industry. The company's strong financial performance, commitment to innovation, and focus on recurring revenue streams have positioned it as a leader in the sector. As the cruise industry continues to grow, Royal Caribbean is well-positioned to capitalize on the increasing demand for its vacation experiences. So, if you're looking for a cruise line stock that's gaining momentum, Royal Caribbean should be on your radar.