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Norwegian Cruise (NCLH) Posts Narrower-than-Expected Q2 Loss

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Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) reported second-quarter 2021 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. Following the results, the company’s shares are up 1.2% in pre-market trading session.

Meanwhile, the company announced phased relaunch plans for all 28 ships. The company stated that the process has begun with the resumption of Norwegian Jade on Jul 25, 2021 and is expected to continue through Apr 1, 2022. The company expects fleet capacity to reach 40% by third-quarter 2021 and approximately 75% by 2021-end.

Frank Del Rio, president and CEO of Norwegian Cruise, stated, “We are ready and eager to welcome guests back onboard and continue to see incredible strength in our booking trends for future cruises. Our team is working tirelessly to execute on our plan to return our full fleet to operation by April 2022 to capitalize on this unparalleled pent-up demand.”

Earnings & Revenue Discussion

 

Norwegian Cruise reported adjusted loss per share of $1.93, narrower than the Zacks Consensus Estimate of a loss of $2. In the prior-year quarter, the company reported loss per share of $2.78.

Revenues of $4.4 million lagged the consensus of $7 million. The bottom line also slumped 74.2% year over year. The downside was caused by a decline of 88.6% and 10% in passenger ticket revenues and onboard and other revenues, respectively. Cancellation of voyages negatively impacted the top line.

Expenses & Operating Results

Total cruise operating expenses declined 17.2% for the quarter under review from the year-ago quarter’s levels. The company’s expenses in the quarter primarily stemmed from crew costs, which include salaries, food and other repatriation costs, fuel, as well as other ongoing expenses such as insurance and ship maintenance.

Gross cruise costs during second quarter inched up 0.5% year over year to $435.2 million. Adjusted net cruise costs (excluding fuel) came in at $349.9 million compared with $323.3 million in the prior-year quarter. Fuel price per metric ton (net of hedges) to $673 from $594 in 2020.

Net interest expenses during the quarter came in at $137.3 million, up from $114.5 million in the year-ago quarter.

Balance Sheet

Cash and cash equivalents as of Jun 30, 2021 were $2.8 billion, up from $3.3 billion at the end of Dec 31, 2020. Long-term debt as of Jun 30, 2021 came in at $11.9 billion compared with $12.2 billion as of Mar 31, 2021.

The company's monthly average cash burn for second-quarter 2021 was approximately $200 million compared with $190 million in the previous quarter. For third-quarter 2021, it expects the average cash burn rate to temporarily remain elevated at approximately $285 million per month due to the phased relaunch of additional vessels.

Other Updates

Despite lower sales and marketing investments, the company is reporting solid bookings for future periods across all brands. It stated that overall cumulative bookings for full year 2022 are ahead of 2019 levels. This includes incorporation of higher pricing as well as the dilutive impact of future cruise credits (FCCs). As of Jun 30, the company’s advance ticket sales (including long-term portion) came in at $1.4 billion. The amount includes FCCs worth approximately $800 million.

Zacks Rank & a Stock to Consider

Norwegian Cruise — which shares space with Royal Caribbean Cruises Ltd (RCL - Free Report) and Carnival Corporation & plc (CCL - Free Report) , in the Zacks Leisure and Recreation Services industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock worth considering in the same space is WW International, Inc. (WW - Free Report) , carrying a Zacks Rank #2 (Buy).

WW International has three-five-year earnings per share growth rate of 15%.