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Norwegian Cruise Line (NCLH) Up 90.5% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Norwegian Cruise Line (NCLH - Free Report) . Shares have added about 90.5% 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 drivers.

Norwegian Cruise Q1 Earnings Miss Estimates

Norwegian Cruise reported first-quarter 2020 results, wherein both earnings and revenues missed the Zacks Consensus Estimate. Moreover, both the top and bottom lines declined sharply year over year owing to the coronavirus-induced shutdowns. 

The company has already withdrawn 2020 guidance on account of the temporary suspension of sailings globally. The company stated the pandemic has impacted its financial position and believes that if suspension is further extended its liquidity and financial position will affected significantly.

Earnings & Revenue Discussion

The company reported adjusted loss per share of 99 cents, wider than the Zacks Consensus Estimate of loss of 52 cents. In the prior-year quarter, the company had reported earnings per share of 83 cents.

Revenues of $1,246.9 million missed the consensus mark of $1,278 million and declined 11.2% year over year. The downside can be attributed to 13.6% decline in passenger ticket revenues and decrease of 5.6% in onboard and other revenues.

Gross yield (total revenues per Capacity Day) rose 1.6% in the quarter on a year-over-year basis due to rise in onboard spending. While net yield decreased 12.6% in the reported quarter on a constant-currency (cc) basis, it declined 12.3% on a reported basis.

Expenses & Operating Results

Total cruise operating expenses increased 20.3% in the quarter under review from the year-ago quarter. The increase can be attributed to costs associated with the suspension of cruise voyages and rise in fuel expenses. Addition of Norwegian Encore and Seven Seas Splendor to the fleet also pushed expenses higher.

Gross cruise costs per capacity day surged 34.5%. Adjusted Net cruise costs (excluding fuel) per Capacity Day increased 26.1% at cc and 25.7% on a reported basis. Fuel price per metric ton (net of hedges) was up 2.4% to $508 in the quarter under review.

Net interest expenses were $614 million in the first quarter, up from $461 million in the year-ago quarter.

Balance Sheet

Cash and cash equivalents as of Mar 31, 2020, were $1.4 billion, up from $252 million as of Dec 31, 2019. Long-term debt at the end of the first quarter totaled $8.4 billion, higher than $6.1 billion at the end of 2019.

In an effort to raise nearly $2 billion, the company launched a series of capital markets transactions on May 5, 2020. As a result of high demand, oversubscription and the full exercise of options to purchase additional ordinary shares and exchangeable notes, the total amount of gross proceeds rose to roughly $2.4 billion. Following these transactions, the company’s total pro-forma liquidity is approximately $3.7 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -76.84% due to these changes.

VGM Scores

At this time, Norwegian Cruise Line has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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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