Norwegian Cruise Line (NCLH) Up 3.1% Since Last Earnings Report: Can It Continue?

A month has passed since the last earnings report from the Norwegian cruise line (NCLH). Shares rose about 3.1% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or will Norwegian Cruise Line see a decline? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the key drivers.

Norwegian cruise results in the first quarter broke a record, with bookings increasing year-on-year

Norwegian Cruise reported mixed first-quarter 2024 results, with earnings topping the Zacks Consensus Estimate and revenue lagging behind. On the other hand, profits and profits increased year-on-year.

Quarterly results show high demand for the company’s products and offer, resulting in record bookings. This upward trend has helped the company maintain its highest ever booked ticket position and unprecedented levels of advance ticket sales through 2024. In addition, its continuous margin expansion initiative has ensured continued improvement in operating costs, which has translated into financial benefits. Thanks to the improving trend, the company raised its adjusted EBITDA and adjusted earnings per share (EPS) forecast for 2024.

NCLH is also optimistic about its new facility construction program as it believes that increasing production capacity and expanding its product portfolio will further boost the company’s growth prospects in the coming period.

Discussion about earnings and revenues

Norwegian Cruise reported adjusted earnings per share of 16 cents, up 33.3% from the Zacks Consensus Estimate of 12 cents. In the year-ago quarter, the company reported an adjusted loss per share of 30 cents.

Quarterly revenue of $2.19 billion topped the consensus estimate of $2.24 billion by 2.2%. The company reported revenue of $1.82 billion in the year-ago quarter.

Passenger ticket revenue was $1.46 billion, compared to $1.21 billion reported in the prior-year quarter.

Onboard and other revenues increased to $731.4 million from $613.1 million reported in the year-ago quarter.

Expenses and operating results

Total cruise operating costs increased 8.6% to $1.39 billion from the prior-year quarter level. The company’s expenses in the quarter were mainly due to increases in wages, fuel and commissions, transportation, on-board and other costs.

In the first quarter, gross cruise costs per day of throughput were $300, up from $298 reported a year ago. Adjusted net cruise costs (excluding fuel) per capacity date were approximately $165 (or $164 in cc), reflecting continued year-over-year growth. The fuel price per metric ton (excluding hedges) fell to $735 from $779 in 2023.

Net interest expense was $218.2 million compared to $171.3 million recorded in the prior-year quarter.

The story continues

Balance

As of March 31, 2024, Nordic Cruise had cash and cash equivalents of $559.8 million compared to $402.4 million at the end of 2023. Long-term debt was $12.01 billion compared to $12.31 USD billion at the end of 2023

Reservation update

The company saw strong consumer demand in the first quarter, achieving record bookings in a strong WAVE season. This helped NCLH maintain its record position for the next twelve months. There was an 11% increase in onboard revenue per day of throughput year-over-year. The company reported record pre-sale ticket sales of $3.8 billion, up 13% from 2023 levels.

Exceptional demand for all three of the company’s reportable brands almost completely offset the impact of postponed Middle East and Red Sea cruises.

Guidance for Q2 and 2024

In the second quarter of 2024, Norwegian Cruise expects occupancy to be approximately 105.7% and capacity days to be approximately 5.8 million. For the quarter, adjusted interest expense is expected to be approximately $185 million, while depreciation and amortization is expected to be approximately $225 million. Adjusted EBITDA is expected to be approximately $555 million. Adjusted EPS is expected to be nearly 32 cents.

In 2024, the company expects occupancy to be approximately 105.1% and capacity days to be approximately 23.5 million. Adjusted interest expense is now expected to be approximately $740 million for the year (compared to prior expectations of approximately $730 million). Projected depreciation is almost $895 million. Adjusted EBITDA for the year is now expected to be nearly $2.25 billion, up from previously expected approximately $2.2 billion. Adjusted EPS for 2024 is now expected to be nearly $1.32, compared to prior expectations of around $1.23.

How have estimates changed since then?

Investors have witnessed an upward trend in estimate revisions over the last month.

As a result of these changes, the consensus estimate moved by 8.05%.

VGM results

Over this time, Norwegian Cruise Line has achieved a strong growth rate of A, although it lags slightly behind its Momentum Score with a B. Plotting a somewhat similar path, the stock is rated an A on the value side, meaning that in the upper 20% of this investment strategy.

Overall, the company’s Total VGM Score is A. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for the stock are trending upwards, and the scale of these revisions looks promising. Notably, the Norwegian cruise line carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

The Norwegian cruise line is part of the Zacks Leisure and Leisure Services industry. Another stock in the same industry, Royal Caribbean (RCL), has gained 7.4% over the past month. More than a month has passed since the company announced its results for the quarter ended March 2024.

In the most recent quarter, Royal Caribbean reported revenue of $3.73 billion, representing a year-over-year change of +29.2%. EPS of $1.77 for the same period compared to -$0.23 a year earlier.

Royal Caribbean is expected to report earnings per share of $2.75 for the current quarter, representing a year-over-year change of +51.1%. Over the past 30 days, the Zacks Consensus Estimate has moved -0.5%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Royal Caribbean. The stock also has a VGM Rating of B.

Want the latest recommendations from Zacks Investment Research? Today you can download the top 7 stocks for the next 30 days. Click to get this free report

Norwegian Cruise Line Holdings Ltd. (NCLH): Free Stock Analysis Report

Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research