Royal Caribbean Cruise Slash Annual Profit Forecast as Fuel Costs Surge

Royal Caribbean cut its annual earnings forecast on Thursday, even after reporting a better-than-expected quarterly profit, as surging fuel costs linked to the Iran war weighed on the cruise operator.

Still, its shares jumped 6% as demand for its vacation destinations remained resilient. Bookings for high-margin Mediterranean itineraries, which had softened due to geopolitical tensions, have now rebounded and are running at a higher pace than the same time last year, the company said.

Royal Caribbean's efforts of investing in diverse offerings such as private islands and new cruise itineraries, including "Star of the Seas", have helped draw seasoned cruisers and new customers alike.

The company expects annual revenue to grow roughly 10%, compared with its prior forecast of double-digit growth.

Fuel costs, based on current at-the-pump rates, net of hedging, however, are expected to be about $1.3 billion higher than its prior full-year forecast of about $1.17 billion, Royal Caribbean said. The company is 59% hedged for the remainder of 2026 at below-market rates.

The second quarter has higher exposure to premium itineraries affected by recent global events, with these dynamics also impacting the third quarter, it said.

Cruise operators, heavily dependent on fuel oil and marine gas oil, are navigating a tougher environment as stalled U.S.-Iran negotiations raise concerns about prolonged disruptions to the Middle Eastern supply, driving up oil prices.

"Sustained higher fuel costs will be a headwind to profitability, but we think RCL can adjust itineraries to mitigate this effect," CFRA Research analyst Alex Fasciano said, adding that the cruise operator is seeing limited expenses elsewhere.

Shares of rivals Carnival Corp and Norwegian Cruise Line Holdings were up about 4% and 3%, respectively.

Royal Caribbean expects fiscal 2026 adjusted profit per share to be between $17.10 and $17.50, compared with its prior forecast of $17.70 to $18.10.

First-quarter revenue stood at $4.45 billion, largely in line with analysts' estimates, according to data compiled by LSEG.

Adjusted profit of $3.60 per share topped the estimate of $3.19, benefiting from higher ticket pricing.

Stock performance of major cruise operators so far this year https://www.reuters.com/graphics/ROYAL%20CARIBBEAN-RESULTS/jnpwrrbwyvw/chart.png

(Reuters)