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Norwegian Cruise (NCLH) Surges 67% in a Year: More Upside Left?
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Shares of Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) have increased 66.8% in the past year compared with the industry’s 24.4% growth. The company is benefiting from solid onboard revenue generation, improving occupancy and fleet-expansion efforts. Also, the emphasis on digital initiatives bode well.
An upward revision in earnings estimates for 2023 reflects analysts’ optimism regarding the company’s growth potential. In the past 60 days, the Zacks Consensus Estimate for 2023 earnings moved up 8.5% to 77 cents per share.
Key Growth Drivers
Norwegian Cruise is benefiting from solid onboard revenue generation. During the first quarter of 2023, gross onboard revenue per passenger cruise day was nearly 30% higher than 2019 levels. The upside was primarily driven by enhancements to its bundled offerings. Also, the emphasis on margin enhancement initiatives, such as corporate overhead reductions, itinerary optimization, supply chain initiatives and the rationalization of product delivery, bodes well.
Image Source: Zacks Investment Research
Norwegian Cruise benefits from improvements in occupancy. In first-quarter 2023, occupancy was approximately 101.5%, exceeding the company’s expectations of approximately 100%. In the previous quarter, the company reported an occupancy of 87%. It anticipates occupancy ramp-up to complete and reach approximately 105% during the second quarter of 2023. Relaxation in COVID-related protocols is likely to add to the positives.
Norwegian Cruise is constantly striving to expand its fleet size to drive growth. It plans to introduce eight more ships through 2028. A majority 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 one Allura Class Ships to be delivered in 2025. For the Norwegian brand, the company has five Prima Class Ships on order, with scheduled delivery dates from 2023 through 2028.
The company continues to make use of strategic and data-driven tools for marketing, product development and enhance the consumer experience. It is focused on identifying and evaluating incremental opportunities across every area of the business, that pave path for an accelerated margin recovery.
During the first quarter 2023, the company initiated the rollout of the Starlink low-latency broadband internet system in a phased manner across its fleet. The strategic and cost-effective initiative focuses on the reliability and speed of Internet connectivity at sea. Also, the initiative supports the company’s brand value propositions as well as attract new cruisers to sail. Going forward, the company remains optimistic in this regard and anticipates the initiative to drive growth in the upcoming period.
Hurdles
Norwegian Cruise has been bearing the brunt of high expenses for quite some time. During the first quarter of 2023, total cruise operating expenses came in at $1,280.4 million compared with $735.4 million reported in the year-ago quarter. The company’s expenses in the quarter stemmed from the resumption of cruise voyages and inflationary pressures. The company reported a rise in payroll, fuel and direct variable costs of fully-operating ships. Also, inflationary pressures related to food, perishables and logistics added to the woes. The company anticipates inflation and global supply chain constraints to dent margins in the near term. The company is cautious about the ongoing uncertain macroeconomic environment.
Zacks Rank & Stocks to Consider
Norwegian Cruise currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Consumer Discretionary sector are as follows:
Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 26.4%, on average. Shares of RCL have surged 157.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Royal Caribbean Cruises’ 2023 sales and EPS indicates a rise of 48.5% and 162.5%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 147.9%, on average. Shares of TCOM have increased 56.1% in the past year.
The Zacks Consensus Estimate for Trip.com Group’s 2023 sales and EPS implies an increase of 102.2% and 334.5%, respectively, from the year-ago period’s levels.
Skechers U.S.A., Inc. (SKX - Free Report) sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 18.8%, on average. Shares of SKX have increased 41.1% in the past year.
The Zacks Consensus Estimate for Skechers U.S.A.’s 2023 sales and EPS suggests a rise of 7.7% and 31.5%, respectively, from the year-ago period’s levels.
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Norwegian Cruise (NCLH) Surges 67% in a Year: More Upside Left?
Shares of Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) have increased 66.8% in the past year compared with the industry’s 24.4% growth. The company is benefiting from solid onboard revenue generation, improving occupancy and fleet-expansion efforts. Also, the emphasis on digital initiatives bode well.
An upward revision in earnings estimates for 2023 reflects analysts’ optimism regarding the company’s growth potential. In the past 60 days, the Zacks Consensus Estimate for 2023 earnings moved up 8.5% to 77 cents per share.
Key Growth Drivers
Norwegian Cruise is benefiting from solid onboard revenue generation. During the first quarter of 2023, gross onboard revenue per passenger cruise day was nearly 30% higher than 2019 levels. The upside was primarily driven by enhancements to its bundled offerings. Also, the emphasis on margin enhancement initiatives, such as corporate overhead reductions, itinerary optimization, supply chain initiatives and the rationalization of product delivery, bodes well.
Image Source: Zacks Investment Research
Norwegian Cruise benefits from improvements in occupancy. In first-quarter 2023, occupancy was approximately 101.5%, exceeding the company’s expectations of approximately 100%. In the previous quarter, the company reported an occupancy of 87%. It anticipates occupancy ramp-up to complete and reach approximately 105% during the second quarter of 2023. Relaxation in COVID-related protocols is likely to add to the positives.
Norwegian Cruise is constantly striving to expand its fleet size to drive growth. It plans to introduce eight more ships through 2028. A majority 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 one Allura Class Ships to be delivered in 2025. For the Norwegian brand, the company has five Prima Class Ships on order, with scheduled delivery dates from 2023 through 2028.
The company continues to make use of strategic and data-driven tools for marketing, product development and enhance the consumer experience. It is focused on identifying and evaluating incremental opportunities across every area of the business, that pave path for an accelerated margin recovery.
During the first quarter 2023, the company initiated the rollout of the Starlink low-latency broadband internet system in a phased manner across its fleet. The strategic and cost-effective initiative focuses on the reliability and speed of Internet connectivity at sea. Also, the initiative supports the company’s brand value propositions as well as attract new cruisers to sail. Going forward, the company remains optimistic in this regard and anticipates the initiative to drive growth in the upcoming period.
Hurdles
Norwegian Cruise has been bearing the brunt of high expenses for quite some time. During the first quarter of 2023, total cruise operating expenses came in at $1,280.4 million compared with $735.4 million reported in the year-ago quarter. The company’s expenses in the quarter stemmed from the resumption of cruise voyages and inflationary pressures. The company reported a rise in payroll, fuel and direct variable costs of fully-operating ships. Also, inflationary pressures related to food, perishables and logistics added to the woes. The company anticipates inflation and global supply chain constraints to dent margins in the near term. The company is cautious about the ongoing uncertain macroeconomic environment.
Zacks Rank & Stocks to Consider
Norwegian Cruise currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Consumer Discretionary sector are as follows:
Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 26.4%, on average. Shares of RCL have surged 157.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Royal Caribbean Cruises’ 2023 sales and EPS indicates a rise of 48.5% and 162.5%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 147.9%, on average. Shares of TCOM have increased 56.1% in the past year.
The Zacks Consensus Estimate for Trip.com Group’s 2023 sales and EPS implies an increase of 102.2% and 334.5%, respectively, from the year-ago period’s levels.
Skechers U.S.A., Inc. (SKX - Free Report) sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 18.8%, on average. Shares of SKX have increased 41.1% in the past year.
The Zacks Consensus Estimate for Skechers U.S.A.’s 2023 sales and EPS suggests a rise of 7.7% and 31.5%, respectively, from the year-ago period’s levels.