How Realistic is Royal Caribbean's 20% EPS CAGR Goal Through 2027?

Royal Caribbean Cruises Ltd. (RCL) has set an ambitious goal to grow adjusted earnings per share (EPS) at a 20% compound annual rate through 2027. The company is relying on a balanced approach that includes moderate capacity growth, yield improvement and cost control. Its Perfecta Performance Program is structured around these priorities and also targets a return on invested capital in the high teens.

In the first quarter of 2025, Royal Caribbean's adjusted earnings and revenues increased 53.1% and 7.3%, respectively, year over year. The performance was supported by high close-in demand and higher pricing, with strong onboard spending also contributing. For 2025, the company expects adjusted EPS to grow approximately 28%, with guidance now in the range of $14.55 to $15.55. Management attributes this outlook to better-than-expected first-quarter results, as well as favorable foreign exchange and fuel rates. A solid booking position and steady cost execution also support the company’s confidence in meeting its full-year targets.

The company continues to follow its proven formula of moderate capacity growth, moderate yield growth and strong cost control. Upcoming ship launches like Star of the Seas and Celebrity Xcel, combined with new destination offerings such as Royal Beach Club Nassau, are expected to enhance pricing power and guest volumes during the second half of the year.

These efforts are further supported by improved booking tools, rising digital engagement and operational flexibility across key markets. With consistent demand trends, a stable balance sheet and a focused long-term strategy, RCL appears well positioned to achieve its multi-year EPS growth goal through 2027.

Competitive Positioning in the Cruise Industry

Carnival Corporation & plc (CCL) is seeing broad-based strength across its business, driven by sustained demand, higher booking volumes and disciplined cost management. Backed by solid performance, the company raised its fiscal 2025 adjusted EPS guidance to approximately $1.97, indicating a 39% increase from $1.42 in fiscal 2024. Strategic focus on fleet optimization, new ship additions and global marketing efforts continues to support growth as Carnival looks to capture rising international demand.

Norwegian Cruise Line Holdings Ltd. (NCLH) is progressing on its fleet transformation and cost-efficiency strategy. For 2025, Norwegian Cruise expects adjusted EPS of $2.05, implying a 13% increase from $1.82 in 2024. New capacity additions like Norwegian Aqua and upgrades to digital tools are enhancing guest experience and supporting upsell opportunities. While Norwegian Cruise operates at a smaller scale, its continued focus on fleet management and disciplined cost control is helping strengthen the earnings outlook.

RCL’s Price Performance, Valuation & Estimates

Shares of Royal Caribbean have gained 57% in the past three months compared with the industry’s growth of 26.6%.

From a valuation standpoint, Royal Caribbean trades at a forward price-to-sales ratio of 4.73X, significantly up from the industry’s average of 2.45X.

The Zacks Consensus Estimate for RCL’s 2025 and 2026 earnings implies a year-over-year uptick of 30.8% and 14.5%, respectively. The EPS estimates for 2025 have increased in the past 30 days.

RCL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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