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Bear of the Day: Norwegian Cruise Line (NCLH)

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Norwegian Cruise Line Holdings (NCLH - Free Report) is the now $5 billion operator of three brands, including Oceania Cruises and Regent Seven Seas Cruises, and 28 ships. 

The company saw revenues drop 80% this year to $1.3 billion from last year's $6.46B haul, while the bottom line plunged 263% from 2019's $5.09 to ($8.30). 

Cruise lines suffered some of the deepest impacts from the global pandemic, along with other travel and leisure enterprises like hotels, airlines, restaurants and movie theaters.

My colleague Tracey Ryniec wrote about NCLH as the Bear of the Day in early March when those dramatic impacts were first being felt, but shares were still trading above $30. It was the last time they saw that level. Here's what she had to say on March 5...

Norwegian Cruise Line Holdings suddenly finds itself in a crisis not of its own making as the coronavirus fears hit cruise travel. This Zacks Rank #5 (Strong Sell) has fallen over 48% in the last month.

Norwegian is a global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands.

It has a combined fleet of 28 ships with approximately 59,150 berths. It offers itineraries to more than 490 destinations worldwide.

The Company will introduce nine additional ships through 2027.

Coronavirus Hitting Earnings for 2020 and 2021

On Feb 20, Norwegian reported its fourth quarter and full year 2019 results. It should have been about the company taking another victory lap.

It saw record revenue and earnings per share for 2019. It was also the 6th consecutive year it had set those records.

Norwegian was also the first global cruise line to eliminate single use water bottles across its entire fleet.

But the coronavirus hit China, and the rest of Asia, in the first quarter of 2020 and that's all anyone can focus on.

It entered the year with a record booked position and at higher pricing, as the global consumer was feeling good and willing to spend on travel.

As of Feb 20, the current known direct impact to operations from COVID-19 was expected to be about $0.75 per share. That included customer incentive compensation and 40 canceled, modified or redeployed Asia voyages across the company's three brands.

They have redeployed the Norwegian Spirit to the Eastern Mediterranean for summer 2020, with an extremely condensed booking window.

It gave a full year guidance range, excluding both known and unknown impacts from the coronavirus outbreak of $5.40 to $5.60.

(end of Tracey Ryniec report from March 5)

As you can see, Norwegian management was trying to be optimistic on February 20 about the full-year outlook with that EPS guidance, but they really had no idea what was coming.

By early March, analysts were trying to see the horizon better and they lowered the 2020 Zacks Consensus to $4.16, from $5.57 just 30 days prior.

By early April, those profit projections had plummeted into negative territory and they just kept falling ahead of the company's Q1 report in mid-May.

After those results and outlook, including a 90% EPS miss of (99) cents vs the consensus of (52) cents, full-year estimates stabilized at ($6.83).

But the June quarter (reported August 6) brought more visibility about the pandemic impacts past and future, and though the EPS miss this time was only 27% -- ($2.78) vs. ($2.19) -- the 2020 earnings consensus plunged further to its current ($8.30).

A positive revenue surprise did lift the stock from under $13 up to $18 last month, but until the EPS estimates stop going down and start heading back up, it's not a good time to take these shares for a cruise. 

The Zacks Rank will let you know, just as it did in March.

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