Norwegian Cruise's turns red, as revenue came up shy of high expectations

By Tomi Kilgore

Full-year outlooks for earnings and net yield were raised amid 'robust' demand, and new bookings 'pivot' to 2025 sailings

Shares of Norwegian Cruise Line Holdings Ltd. reversed into the red Wednesday, after the cruise company beat second-quarter profit expectations amid continued "robust" demand, but missed Wall Street's high expectations for revenue as onboard spending disappointed.

Net yield, a closely watched measure of margins on capacity days, was well above the company's guidance but missed analyst expectations.

Still, the company stressed that consumer demand for cruised remained strong, with most of the forward bookings "pivoting" to 2025 sailings at higher prices.

"We are witnessing robust demand with strong pricing and booking volumes leading to record-breaking advanced ticket sales," said Chief Executive Harry Sommer on the post-earnings call with analysts, according to an AlphaSense transcript.

"[W]e are anticipating strong pricing growth across all four quarters in 2024," Sommer added.

The stock (NCLH) had cruised as much as 4.8% higher soon after the opening before, before turning lower. It was down 0.9% in midday trading.

Net income rose to $163.4 million, or 35 cents a share, from $86.1 million, or 20 cents a share, in the same period a year ago.

Excluding nonrecurring items, adjusted earnings per share of 40 cents beat the FactSet consensus of 34 cents.

Net yield was up 6.3% from a year ago, which beat the guidance the company provided on May 1 of 4.3% but missed the FactSet consensus of 6.5%.

Revenue grew 7.6% to $2.372 billion, to come up just shy of the FactSet consensus of $2.377 billion.

As an example of high Wall Street expectations, the FactSet consensus for net yield had increased from 5.4% from the end of the first quarter while expectations for revenue had climbed up from $2.35 billion.

Passenger-ticket revenue for the latest quarter rose 8.4% to $1.602 billion, compared with the FactSet consensus of $1.609 billion, and onboard and other revenue was up 6% to $770.4 million, to miss expectations of $781.3 million.

Occupancy was 105.9%, above the company's guidance of 105.7%.

"The company continues to experience strong consumer demand as the majority of new bookings are pivoting to 2025 sailings," Norwegian said in a statement. "As a result, the company remains at the upper range of its optimal booked position on a 12-month forward basis."

Looking ahead, the company raised its 2024 guidance for adjusted earnings per share to $1.53 from $1.32, for net yield to $8.2% from 6.4% and for occupancy to 105.2% from 105.1%.

The stock has lost 8.9% year to date, while the Consumer Discretionary Select Sector SPDR ETF XLY has gained 5% and the S&P 500 index has advanced 15.8%.

-Tomi Kilgore

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07-31-24 1201ET

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