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Manufacturing data, Norwegian Cruise Line earnings: What to know in markets Thursday

Thursday’s economic data earnings releases are poised to shed more light on the impact of the coronavirus to the domestic economy and some individual companies in the travel industry.

The Philadelphia Fed will release its February business activity outlook survey Thursday morning at 8:30 a.m. ET. Consensus economists expect the report will show manufacturing activity weakened slightly in the region in February versus January, with the headline index dropping to 11.0 from 17.0. February’s print had marked the highest level since May 2019.

The report comes on the heels of a much stronger than Empire State manufacturing index, which rose to the highest level in nine months, data earlier this week showed. Beneath the headline report, the new orders index registered at the best level since September 2017, and shipments were the strongest since November 2018.

That print, which captured manufacturing activity trends for the New York region, was the first since the escalation of coronavirus case, providing some respite for investors on edge over the impact of the global outbreak to domestic industrial companies.

“We acknowledge some upside risk [for the Philadelphia Fed index] after the Empire State results,” Rubeela Farooqi, chief U.S. economist for High Frequency Economics, wrote in a note Wednesday. “The export-oriented manufacturing sector was weighed down by the trade war last year. However, in the aftermath of the ‘Phase One’ deal with China, trade tensions have eased somewhat, and early indications suggest conditions for manufacturers are improving.”

The coronavirus outbreak and related disruptions to company supply chains remains a near-term risk, Farooqi added. And ongoing issues with Boeing, as its 737 Max aircraft remain grounded and production halted, have also been an overhang on the manufacturing sector.


Separately, Norwegian Cruise Lines (NCLH) is also due to release fourth-quarter results Thursday.

The cruise operator’s stock has been in focus since the start coronavirus outbreak, which has resulted in more than 2,000 deaths among more than 75,000 global cases to date. Shares of companies in the travel industry – including airlines, hotel and casino operators, in addition to cruise lines – have been especially volatile amid coronavirus developments. Shares of Norwegian have fallen 11% for the year to date through Wednesday’s close, after rising 38% in 2019.

The Norwegian Jewel cruise ship was in lock down while health authorities test a man for Coronavirus on February 14, 2020 in Sydney, Australia. The ship is docked in Sydney this morning following a 10 day tour of New Zealand. (Photo by Lisa Maree Williams/Getty Images)

Consensus analysts expect Norwegian Cruise will deliver fourth-quarter adjusted earnings of 70 cents on sales of $1.43 billion, according to Bloomberg data. These results, however, will exclude the most recent impact of the coronavirus on cruise demand, with the virus having escalated throughout late January and early February.

As a result, first-quarter and full-year guidance will be paramount, with consensus analysts expecting the company to guide toward first-quarter EPS of 61 cents. Such a result would represent a 36% decline over last year’s earnings.

Norwegian Cruise Lines’ earnings results come after peer cruise operator Royal Caribbean warned about a 25-cent impact to first-quarter EPS, and an at least 65-cent hit to full-year EPS, due to cruise cancelations and other itinerary changes amid the coronavirus. Royal Caribbean has so far canceled 18 cruises in Southeast Asia as the outbreak continues.

For Norwegian Cruise Lines, Wall Street firm Stifel said its checks suggest cancelations are running close to 10%, or “basically double the normal average.”

“However, that cancellation number is factually inaccurate, given those cancellations include cancelled itineraries. If a passenger on a canceled sailing decides to take a different itinerary that still incorporates the passenger as ‘canceled’ and a new net booking,” Stifel analyst Steven Wieczynski wrote in a note last week.

“We believe until investors get a better sense of the ultimate impact this ‘noise’ will have on the business, they will continue to tread water around these names,” he said.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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