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Norwegian Cruise (NCLH) Lags Q2 Earnings & Revenues, Stock Down

Zacks Equity Research
·5 min read

Norwegian Cruise Line Holdings Ltd. NCLH reported second-quarter 2022 results, wherein earnings and revenues missed the Zacks Consensus Estimate. However, both the metrics improved year over year. Following the results, the company’s shares were down 7% in the pre-market trading session on Aug 9.

On May 7, 2022, the company completed its phased fleet relaunch, and its entire 28-ship fleet is now operating. In second-quarter 2022, occupancy was 65%, in line with the company’s expectations. In the first quarter of 2022, occupancy was 48%. The company expects occupancy to increase sequentially. Occupancy is likely to average in the low 80% range in the third quarter of 2022.

Frank Del Rio, president and CEO of Norwegian Cruise, stated, “We are encouraged by the continued strong consumer demand we are experiencing which is reflected in our record pricing, accelerating booking volumes, especially for 2023 and beyond, and highest ever onboard revenue generation. Having emerged from the pandemic and returning to more normal operations, we remain steadfast in our strategy and commitment to protect our brands’ positioning and industry-leading pricing, which we firmly believe is the best way to maximize long-term value for all our stakeholders.”

Earnings & Revenue Discussion

Norwegian Cruise reported an adjusted loss per share of $1.14, wider than the Zacks Consensus Estimate of a loss of 82 cents. In the prior-year quarter, the company reported a loss per share of $1.93.

Quarterly revenues of $1,187.2 million lagged the consensus mark of $1,264 million. In the prior-year quarter, the company had reported revenues of $4.4 million. The upside can primarily be attributed to the resumption of cruise operations. In the quarter under review, passenger ticket revenues were $793.9 million compared with $1.5 million reported in the prior-year quarter. Onboard and other revenues increased to $393.3 million from $2.8 million reported in the prior-year quarter.

Norwegian Cruise Line Holdings Ltd. Price, Consensus and EPS Surprise

Norwegian Cruise Line Holdings Ltd. price-consensus-eps-surprise-chart | Norwegian Cruise Line Holdings Ltd. Quote

Expenses & Operating Results

Total cruise operating expenses increased 329.8% in the quarter under review from the year-ago quarter’s levels. The company’s expenses in the quarter primarily stemmed from the resumption of cruise voyages. The company noted that the increase in 2022 reflects an improvement in payroll, fuel, and direct variable costs of fully operating ships.

Gross cruise costs in the second quarter increased 222.2% year over year to $1,402.4 million. Adjusted net cruise costs (excluding fuel) amounted to $838.1 million compared with $349.9 million in the prior-year quarter. Fuel price per metric ton (net of hedges) increased to $836 from $673 in 2021.

Net interest expenses in the quarter were $144.4 million, up from $137.3 million in the year-ago quarter.

Balance Sheet

Cash and cash equivalents as of Jun 30, 2022, were $1.9 billion compared with $1.5 billion at the end of Dec 31, 2021. Long-term debt as of Jun 30, 2022, came in at $12.2 billion compared with $11.6 billion as of Dec 31, 2021.

Guidance & Booking Updates

Due to the coronavirus pandemic and the Russia-Ukraine conflict, the company is unable to estimate the impact on its business. The company expects to report a net loss for third-quarter 2022. In third-quarter 2022, it anticipates net interest expenses to be nearly $160 million. For the full year, it expects the same to be $615 million, excluding losses on extinguishment of debt. Depreciation and amortization are forecast to be roughly $190 million for the third quarter of 2022 and $745 million for the full year of 2022.

The company expects occupancy to be in the low 80% range in the third quarter of 2022. Capacity days are anticipated to be 5 million in the third quarter and 5.1 million in the fourth quarter. In the third quarter, the company expects revenues to be in the range of $1.5-$1.6 billion. Adjusted net cruise cost (excluding fuel per capacity day) is likely to decline by nearly 10% in the second half of 2022 compared to the first half of 2022.

The cumulative booked position for the second half of 2022 continues to be below the comparable 2019 period. However, booking trends for 2023 remain in line with a record of 2019.

Zacks Rank & Key Picks

Norwegian Cruise currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Consumer Discretionary sector are G-III Apparel Group, Ltd. GIII, Marriott International, Inc. MAR and Choice Hotels International, Inc. CHH.

G-III Apparel currently sports a Zacks Rank #1. GIII has a trailing four-quarter earnings surprise of 97.5%, on average. The stock has declined 26.5% in the past year.

The Zacks Consensus Estimate for GIII’s current financial year sales and EPS indicates growth of 13.8% and 8.2%, respectively, from the year-ago period’s reported levels.

Marriott currently carries a Zacks Rank #2 (Buy). MAR has a trailing four-quarter earnings surprise of 1.4%, on average. The stock has increased 36.2% in the past year.

The Zacks Consensus Estimate for MAR’s current financial year sales and EPS indicates growth of 44.6% and 93.7%, respectively, from the year-ago period’s reported levels.

Choice Hotels carries a Zacks Rank #2, at present. CHH has a trailing four-quarter earnings surprise of 20.4%, on average. The stock has increased 4% in the past year.

The Zacks Consensus Estimate for CHH’s current financial year sales and EPS indicates growth of 13.6% and 17.7%, respectively, from the year-ago period’s reported levels.


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