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Here's Why Investors Should Retain Norwegian Cruise (NCLH) Now
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Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) is likely to benefit from fleet expansion efforts and sequential improvement in booking activities. Also, relaxations in certain protocols and restrictions bode well. In the past three months, shares of the company have gained 1.6% against the industry’s fall of 10.4%. However, increased cost of operations and geopolitical tensions raise concerns.
Let us discuss why investors should hold on to the stock for the time being.
Key Catalysts
Norwegian Cruise is constantly looking to expand the fleet size to drive growth. It has plans to introduce nine more ships through 2027. Most of them are on order for the Norwegian Cruise Line, while the rest are for Oceania Cruises and Regent Seven Seas Cruises. For the Regent brand, it has one Explorer Class Ship to be delivered in 2023. For the Oceania Cruises brand, the company has two Allura Class Ships to be delivered in 2023 and 2025. With the project Leonardo, Norwegian Cruise will have an additional six ships with expected delivery dates from 2022 through 2027. In 2023, the company anticipates the additions of Norwegian Viva, Oceania Cruises Vista and Regent Seven Seas Grandeur to its fleet.
Image Source: Zacks Investment Research
Sequential improvements in booking activities have been aiding the company. The bookings include incorporating higher pricing and the dilutive impact of future cruise credits (FCCs). As of Mar 31, 2022, the company’s advance ticket sales (including the long-term portion) were $2.2 billion. The amount includes FCCs worth approximately $0.6 billion. With strong underlying demand, the company reported sequential improvements in net booking volumes and stated that bookings for fourth-quarter 2022 are in line with 2019 levels. The company stated that bookings for 2023 remained strong compared with 2020 and 2019 levels. Going forward, the company intends to focus on strategic marketing efforts to drive demand and high-value bookings in the upcoming periods.
On May 7, 2022, the company completed its phased fleet relaunch, and its entire 28-ship fleet is now operating. Norwegian Cruise was operating at nearly 85% of its capacity by the end of first-quarter 2022. In the quarter under review, occupancy was 48% due to the impact of the Omicron variant. The company expects its occupancy to reach the pre-pandemic level across its fleet no later than the beginning of the third quarter of 2022. Most of the countries in the EU are now allowing travelers from the United States.
Norwegian Cruise has been witnessing a change in view of the pandemic, due to a fall in prevalence and severity of the virus. To this end, protocols and restrictions have been moderated. The latest normal now takes into account the diminished severity of the virus and balances the extent of necessary protocols with the need to resume daily life. The initiative is likely to be backed by attributes such as availability and widespread uptake of vaccines, new therapeutics and broad immunity. Given the improving public health environment, the company initiated the easing of certain COVID-related protocols (in conjunction with the latest CDC guidelines), whereby guests’ masking will be optional across its fleet (effective Mar 1, 2022). The company started welcoming guests under the age of 12 to sail on its ship fleetwide and reduced the required vaccination threshold from 95% to 90%. We believe that the CDC's new voluntary program is an initiative placed in the right direction and that chances of further easing of protocols are likely in the upcoming periods.
Concerns
The coronavirus pandemic has severely affected the company’s booking. During December 2021 and early January 2022, the company witnessed a slowdown in booking activity, primarily due to the Omicron variant of COVID-19 and the emergence of the Russia-Ukraine conflict. Due to this, the cumulative booked position for the second half of 2022 fell below 2019 levels. Although the company announced the restart of cruise voyages, it is unable to evaluate the overall impact of the COVID-19 pandemic on its long-term or short-term business results. The company expects to report a loss in the second quarter of 2022.
Norwegian Cruise has been bearing the brunt of high expenses for quite some time now. During the first quarter of 2022, total cruise operating expenses increased 266.1% year over year to $735.4 million. 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. Also, inflationary pressures relating to food, perishables and other supplies added to the woes. The company's monthly average cash burn for first-quarter 2022 was approximately $375 million compared with $345 million in the previous quarter.
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The Zacks Consensus Estimate for Funko’s current financial year sales and EPS suggests growth of 26.8% and 31%, respectively, from the year-ago period’s reported levels.
Civeo sports a Zacks Rank #2 (Buy) at present. The company has a trailing four-quarter earnings surprise of 1,565.1%, on average. Shares of the company have increased 77.7% in the past year.
The Zacks Consensus Estimate for CVEO’s 2022 sales and earnings per share (EPS) suggests growth of 12.5% and 1,450%, respectively, from the year-ago period’s levels.
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Here's Why Investors Should Retain Norwegian Cruise (NCLH) Now
Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) is likely to benefit from fleet expansion efforts and sequential improvement in booking activities. Also, relaxations in certain protocols and restrictions bode well. In the past three months, shares of the company have gained 1.6% against the industry’s fall of 10.4%. However, increased cost of operations and geopolitical tensions raise concerns.
Let us discuss why investors should hold on to the stock for the time being.
Key Catalysts
Norwegian Cruise is constantly looking to expand the fleet size to drive growth. It has plans to introduce nine more ships through 2027. Most of them are on order for the Norwegian Cruise Line, while the rest are for Oceania Cruises and Regent Seven Seas Cruises. For the Regent brand, it has one Explorer Class Ship to be delivered in 2023. For the Oceania Cruises brand, the company has two Allura Class Ships to be delivered in 2023 and 2025. With the project Leonardo, Norwegian Cruise will have an additional six ships with expected delivery dates from 2022 through 2027. In 2023, the company anticipates the additions of Norwegian Viva, Oceania Cruises Vista and Regent Seven Seas Grandeur to its fleet.
Image Source: Zacks Investment Research
Sequential improvements in booking activities have been aiding the company. The bookings include incorporating higher pricing and the dilutive impact of future cruise credits (FCCs). As of Mar 31, 2022, the company’s advance ticket sales (including the long-term portion) were $2.2 billion. The amount includes FCCs worth approximately $0.6 billion. With strong underlying demand, the company reported sequential improvements in net booking volumes and stated that bookings for fourth-quarter 2022 are in line with 2019 levels. The company stated that bookings for 2023 remained strong compared with 2020 and 2019 levels. Going forward, the company intends to focus on strategic marketing efforts to drive demand and high-value bookings in the upcoming periods.
On May 7, 2022, the company completed its phased fleet relaunch, and its entire 28-ship fleet is now operating. Norwegian Cruise was operating at nearly 85% of its capacity by the end of first-quarter 2022. In the quarter under review, occupancy was 48% due to the impact of the Omicron variant. The company expects its occupancy to reach the pre-pandemic level across its fleet no later than the beginning of the third quarter of 2022. Most of the countries in the EU are now allowing travelers from the United States.
Norwegian Cruise has been witnessing a change in view of the pandemic, due to a fall in prevalence and severity of the virus. To this end, protocols and restrictions have been moderated. The latest normal now takes into account the diminished severity of the virus and balances the extent of necessary protocols with the need to resume daily life. The initiative is likely to be backed by attributes such as availability and widespread uptake of vaccines, new therapeutics and broad immunity. Given the improving public health environment, the company initiated the easing of certain COVID-related protocols (in conjunction with the latest CDC guidelines), whereby guests’ masking will be optional across its fleet (effective Mar 1, 2022). The company started welcoming guests under the age of 12 to sail on its ship fleetwide and reduced the required vaccination threshold from 95% to 90%. We believe that the CDC's new voluntary program is an initiative placed in the right direction and that chances of further easing of protocols are likely in the upcoming periods.
Concerns
The coronavirus pandemic has severely affected the company’s booking. During December 2021 and early January 2022, the company witnessed a slowdown in booking activity, primarily due to the Omicron variant of COVID-19 and the emergence of the Russia-Ukraine conflict. Due to this, the cumulative booked position for the second half of 2022 fell below 2019 levels. Although the company announced the restart of cruise voyages, it is unable to evaluate the overall impact of the COVID-19 pandemic on its long-term or short-term business results. The company expects to report a loss in the second quarter of 2022.
Norwegian Cruise has been bearing the brunt of high expenses for quite some time now. During the first quarter of 2022, total cruise operating expenses increased 266.1% year over year to $735.4 million. 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. Also, inflationary pressures relating to food, perishables and other supplies added to the woes. The company's monthly average cash burn for first-quarter 2022 was approximately $375 million compared with $345 million in the previous quarter.
Zacks Rank & Stocks to Consider
Norwegian Cruise currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Bluegreen Vacations Holding Corporation , Funko, Inc. (FNKO - Free Report) and Civeo Corporation (CVEO - Free Report) .
Bluegreen Vacations sports a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 85.9%, on average. The stock has increased 36.7% in the past year.
The Zacks Consensus Estimate for BVH’s current financial year sales and EPS indicates growth of 11.2% and 35.1%, respectively, from the year-ago period’s reported levels.
Funko sports a Zacks Rank #1. FNKO has a trailing four-quarter earnings surprise of 78.7%, on average. Shares of the company have declined 8.9% in the past year.
The Zacks Consensus Estimate for Funko’s current financial year sales and EPS suggests growth of 26.8% and 31%, respectively, from the year-ago period’s reported levels.
Civeo sports a Zacks Rank #2 (Buy) at present. The company has a trailing four-quarter earnings surprise of 1,565.1%, on average. Shares of the company have increased 77.7% in the past year.
The Zacks Consensus Estimate for CVEO’s 2022 sales and earnings per share (EPS) suggests growth of 12.5% and 1,450%, respectively, from the year-ago period’s levels.