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Norwegian Cruise (NCLH) Stock Up Despite Q1 Earnings Miss

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Norwegian Cruise Line Holdings Ltd. NCLH reported first-quarter 2022 results, wherein earnings and revenues missed the Zacks Consensus Estimate. However, both the metrics improved year over year. Despite reporting lower-than-expected results, NCLH’s shares are up 5.8% in the pre-market trading session after the company announced that it has completed the phased fleet relaunch.

On May 7, 2022, the company completed its phased fleet relaunch, and its entire 28-ship fleet is now operating. Norwegian Cruise was operating at nearly 85% of its capacity by the end of first-quarter 2022. In the quarter under review, occupancy was 48% due to the impact of the Omicron variant. In second-quarter 2022, the company anticipates operating cash flow to be positive.

Frank Del Rio, president and CEO of Norwegian Cruise, stated, “We are encouraged that consumer demand remains robust with net booking volumes not only back to pre-Omicron levels but now approaching historical levels despite a temporary retreat due to the Russia-Ukraine conflict. Pricing remains very strong for all future periods and our value-add bundling strategy is working better than ever.”

Earnings & Revenue Discussion

Norwegian Cruise reported an adjusted loss per share of $1.82, wider than the Zacks Consensus Estimate of a loss of $1.73. In the prior-year quarter, the company reported a loss per share of $2.03.

Quarterly revenues of $521.9 million lagged the consensus mark of $655 million. In the prior-year quarter, the company had reported revenues of $3.1 million. The upside can primarily be attributed to the resumption of cruise operations. In the quarter under review, passenger ticket revenues were $342.5 million compared with $0.2 million reported in the prior-year quarter. Onboard and other revenues increased to $179.5 million from $2.9 million reported in the prior-year quarter.

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

Norwegian Cruise Line Holdings Ltd. Price, Consensus and EPS Surprise
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 266.1% 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 fourth quarter increased 155.3% year over year to $1,031.6 million. Adjusted net cruise costs (excluding fuel) amounted to $742.1 million compared with $323.6 million in the prior-year quarter. Fuel price per metric ton (net of hedges) increased to $724 from $590 in 2021.

Net interest expenses in the quarter were $327.7 million, down from $824.4 million in the year-ago quarter.

Balance Sheet

Cash and cash equivalents as of Mar 31, 2022, were $2.1 billion compared with $1.5 billion at the end of Dec 31, 2021. Long-term debt as of Mar 31, 2022, came in at $12.6 billion compared with $11.6 billion as of Dec 31, 2021.

The company's monthly average cash burn for first-quarter 2022 was approximately $375 million compared with $345 million in the previous quarter. The figure, however, was below the prior guidance of $390 million.

Outlook& 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 net loss for second-quarter 2022. In second-quarter 2022, it anticipates net interest expenses to be nearly $155 million. For the full year, it expects the same to be $605 million, excluding losses on extinguishment of debt. Depreciation and amortization is forecast to be roughly $180 million for the second quarter of 2022 and $750 million for the full year of 2022.

Due to the prevailing scenario, Its current cumulative booked position for the second half of 2022 is below the comparable 2019 period. The company stated that bookings for 2023 remained strong compared with 2020 and 2019 levels.

Zacks Rank & Key Picks

Norwegian Cruise currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Consumer Discretionary sector are Civeo Corporation CVEO, Bluegreen Vacations Holding Corporation BVH and Funko, Inc. FNKO.

Civeo sports a Zacks Rank #1 (Strong Buy) at present. The company has a trailing four-quarter earnings surprise of 1,565.1%, on average. Shares of the company have surged 46.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CVEO’s 2022 sales and earnings per share (EPS) suggests growth of 12.5% and 1,450%, respectively, from the year-ago period’s levels.

Bluegreen Vacations sports a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 85.9%, on average. The stock has surged 31.9% in the past year.

The Zacks Consensus Estimate for BVH’s current financial year sales and EPS indicates growth of 11.5% and 28.7%, respectively, from the year-ago period’s reported levels.

Funko carries a Zacks Rank #2 (Buy). FNKO has a trailing four-quarter earnings surprise of 78.7%, on average. Shares of the company have declined 17.1% in the past year.

The Zacks Consensus Estimate for Funko’s current financial year sales and EPS suggests growth of 24.7% and 28.9%, respectively, from the year-ago period’s reported levels.


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