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Why Is Norwegian Cruise Line (NCLH) Up 3.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Norwegian Cruise Line (NCLH - Free Report) . Shares have added about 3.5% 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 catalysts.

Norwegian Cruise Lags Q2 Earnings & Revenues

Norwegian Cruise reported second-quarter 2022 results, wherein earnings and revenues missed the Zacks Consensus Estimate. However, both the metrics improved year over year.

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.

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.

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.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -235.34% due to these changes.

VGM Scores

At this time, Norwegian Cruise Line has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Norwegian Cruise Line has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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