Norwegian Cruise Line (NCLH) Up 14.1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Norwegian Cruise Line (NCLH). Shares have added about 14.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Norwegian Cruise Line due for a pullback? 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 important drivers.
Norwegian Cruise Q4 Earnings & Revenues Lag Estimates
Norwegian Cruise reported fourth-quarter 2023 results, with earnings and revenues missing the Zacks Consensus Estimate. The top and the bottom line increased on a year-over-year basis.
The company reported robust demand for its Norwegian Cruise Line brand, with bookings and pricing exceeding 2023 levels. Also, it reported solid demand for Oceania Cruises and Regent Seven Seas Cruises across various geographical regions, except for itinerary adjustments due to cancellations in the Middle East and Red Sea regions.
Earnings & Revenue Discussion
Norwegian Cruise reported an adjusted loss per share of 18 cents, wider than the Zacks Consensus Estimate of a loss of 13 cents per share. In the prior-year quarter, the company reported an adjusted loss per share of $1.04.
Quarterly revenues of $1.98 billion missed the consensus mark of $2 billion. In the prior-year quarter, the company reported revenues of $1.5 billion.
In the quarter under review, passenger ticket revenues were $1.33 billion compared with $1.01 billion reported in the prior-year quarter.
Onboard and other revenues increased to $653.3 million from $507.6 million reported in the prior-year quarter.
Expenses & Operating Results
Total cruise operating expenses increased 8.4% in the quarter under review from the year-ago quarter’s levels. The company’s expenses in the quarter primarily stemmed from a rise in payroll, fuel and Commissions, transportation and other expenses.
During the fourth quarter, gross cruise costs dropped 0.2% (from 2019 levels) to $1.65 billion. Adjusted net cruise costs (excluding fuel) amounted to $889.6 million compared with $892 million in the fourth quarter of 2019. Fuel price per metric ton (net of hedges) fell to $726 from $755 in 2022.
Net interest expenses in the quarter were $197.4 million compared with $177.1 million reported in the year-ago quarter.
Balance Sheet
Cash and cash equivalents as of Dec 31, 2023, were $402.4 million compared with $947 million at the end of Dec 31, 2022. Long-term debt came in at $12.3 billion compared with $12.6 billion as of 2022-end.
2023 Highlights
Total revenues in 2023 came in at $8.5 billion compared with $4.8 billion reported in 2022.
Adjusted EBITDA in 2023 came in at $1.9 billion against $(673.9) million reported in 2022.
In 2023, adjusted earnings per share came in at 70 cents against $(4.64) reported in the previous year.
Booking Update
During the fourth quarter, the company reported strong consumer demand, achieving record-high bookings and pricing levels during Black Friday and Cyber Monday week. It reported a rise in Onboard revenue per Passenger Cruise Day (compared to 2019 levels). The company reported Advance ticket sales of $3.2 billion, up 56% from 2019 levels.
However, due to the conflict in Israel and the Red Sea, all calls to Israel were redirected, impacting occupancy rates for the quarter and year. Despite cancellations, the company remains optimistic about future performance.
2024 Guidance
For the first quarter of 2024, the company anticipates occupancy to be approximately 104.8% and Capacity Days to be about 5.9 million. During the quarter, adjusted interest expenses are expected to be approximately $190 million, while depreciation and amortization are anticipated to be approximately $225 million. Adjusted EBITDA is expected to be nearly $450 million. For the fourth quarter, adjusted earnings per share (EPS) is projected to be nearly 12 cents.
For 2024, the company now anticipates occupancy to be approximately 105.1% and Capacity Days to be about 23.5 million. During the year, adjusted interest expenses are expected at approximately $730 million. Depreciation and amortization are anticipated at nearly $895 million. Adjusted EBITDA during the year is expected to be nearly $2.2 billion. For 2024, adjusted EPS is projected to be nearly $1.23.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 116.43% due to these changes.
VGM Scores
At this time, Norwegian Cruise Line has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Norwegian Cruise Line has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Norwegian Cruise Line belongs to the Zacks Leisure and Recreation Services industry. Another stock from the same industry, Live Nation (LYV), has gained 13.3% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Live Nation reported revenues of $5.84 billion in the last reported quarter, representing a year-over-year change of +36.1%. EPS of -$1.22 for the same period compares with -$1.09 a year ago.
For the current quarter, Live Nation is expected to post a loss of $0.21 per share, indicating a change of +16% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.7% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Live Nation. Also, the stock has a VGM Score of D.
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