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Bear of the Day: Norwegian Cruise Line (NCLH)

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Norwegian Cruise Line Holdings, Inc. (NCLH - Free Report) 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.

More Impacts in March

Norwegian said in February that the outbreak continued to impact consumer travel sentiment for cruises in Asia and other areas of operation worldwide.

It had no idea of the extent of this impact and wasn't included in the known $0.75 impact from the canceled Asia cruises.

But based on what airlines are saying about demand, it appears that cruise demand, worldwide, has likely weakened further.

It's not surprising, then, that two analysts have cut 2020 estimates again in the last week.

The 2020 Zacks Consensus has fallen to $4.16 from $5.57 just 30 days ago.

That's an earnings decline of 18.3% from 2019's record of $5.09.

Shares Crushed on Coronavirus Impact Fears

Wall Street likes certainty. Despite giving 2020 guidance just a few weeks ago, it's clear, that no one knows what all the impacts are going to be from the coronavirus on the global economy and businesses.

Therefore, Wall Street sells first and asks questions later.

Norwegian shares have been hammered, declining 48.1% in the last month and now trading at 5-year lows.

It's in good company as its competitors Royal Caribbean Cruises (RCL - Free Report) and Carnival Corp. (CCL - Free Report) are also trading at or near 5-year lows as well.


Investors interested in the cruise stocks may want to wait for better clarification on the earnings outlook before diving in.

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