Episode Details

Royal Caribbean Cruises Ltd. (RCL) Q2 2026 — Reported before the open on July 28 (Q2 2026, the three months ended June 30, 2026). Total revenue $4,832M, up 6.5% from $4,538M. Adjusted EPS $4.21 against a Street number near $3.98 — a beat — and against $4.38 in the same quarter last year, a 3.9% DECLINE. Operating income fell 1.7% to $1,307M and the operating margin went from 29.3% to 27.0%. Adjusted EBITDA fell 1.1% to $1,830M and that margin fell 290bp, from 40.8% to 37.9%. Management raised full-year adjusted EPS guidance to $17.73-$17.87. The stock rose from $305.04 to $322.50, up 5.7%, and closed at $324.00 on August 3. The number nobody put on air: total revenue divided by guests carried was $2,013.26 a year ago and $2,014.12 this quarter. That is EIGHTY-SIX CENTS more per guest, on 145,009 more guests. Royal Caribbean did not raise the price of a cruise in any way that reached the income statement — it sold more of them. Available passenger cruise days rose 4.9%, load factor was 110.2% against 110.3%, and passenger ticket revenue per available berth-day actually FELL 0.3%, from $247.17 to $246.38. In constant currency net yields grew 1.2% against net cruise costs excluding fuel of 3.9% — a spread of NEGATIVE 270 basis points. That is why revenue grew 6.5% and operating income fell. THE CALL: HOLD (4/5, A SUPERB OPERATOR, AND THE SPREAD JUST WENT THE WRONG WAY.) — base-case value ~$270.0 vs ~$324.0 today. KEY METRICS: - CALL: HOLD 4/5 — fair value ~$270 vs $324.00 (about 17% BELOW). An ENTERPRISE frame, because $21,961M of net debt and $16.5B of ships on order make an equity-only model the wrong lens. EV = 267,448,348 shares (303,877,626 issued less 36,429,278 treasury) at $324.00 = $86.65B, plus net debt of $22,836M of debt less $875M of cash = $108.61B — 14.4x the ~$7.53B of FY2026E adjusted EBITDA the guidance implies. STEP 1, an EV/EBITDA grid on FY2027E EBITDA of $7.5B / $8.1B / $8.6B at 9.5x / 12.5x / 14.0x: exactly TWO of the nine cells clear $324 and both need a 14x multiple, the multiple RCL trades at today. Weight the diagonal 30/45/25 and the grid gives $284. STEP 2, an unlevered DCF (EBITDA less cash tax less ALL capex plus the customer-deposit float, 9.25% WACC, 3% terminal), which charges the entire $16.5B order book against the cash: PV of 2027-2036 $35,911M plus terminal $51,715M = EV $87,626M, less $21,961M of net debt, over 267.4M shares = $246. We blend to ~$270. - THE UNDER-COVERED ANGLE — THE YIELD-COST SPREAD INVERTED. In constant currency net yields rose 1.2% ($283.56 to $287.05 per available berth-day) while net cruise costs excluding fuel rose 3.9% ($126.76 to $131.71). As reported the figures are $288.95 and $132.30. Per berth-day RCL took in $3.49 more and spent $4.95 more ex-fuel, $9.49 more including it. The company's own GROSS MARGIN YIELD — published right next to net yields and almost never quoted — fell 5.6%, from $142.00 to $134.11. That is why revenue +6.5% became operating income -1.7% and a 290bp adjusted EBITDA margin decline. - GROWTH IS BERTHS, NOT PRICE: APCD rose 4.9% (12,942,385 to 13,572,396), guests rose 6.4% to 2,399,066, and load factor was 110.2% vs 110.3% — unchanged. Roughly four-fifths of the revenue growth was simply more berths. Revenue per available berth-day rose only 1.5%, $350.63 to $356.01. Split it: passenger ticket revenue per berth-day FELL 0.3% ($247.17 to $246.38) while onboard rose 6.0% ($103.46 to $109.63). All of the pricing came from what happens after boarding. Customer deposits are a record $6,736M — but that is +5.6% against +4.9% capacity, so the record book is largely a capacity effect. - THE FUEL TAKE IS WRONG, THE LABOUR LINE IS THE STORY: fuel was 7.3% of revenue at $355M (+27.2%), $839 a metric ton net of hedging on 422,000 tons — but 58% of forecast consumption is hedged and the company's own sensitivity table says a 10% move in fuel prices is worth just $26M for the rest of the year, about 1% of guided EPS. Strip fuel out entirely and costs stil