Norwegian Cruise Line Holdings Ltd. NCLH reported second-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. The top line surpassed estimates for the fourth-straight quarter.

The top and bottom lines increased on a year-over-year basis. The upside was primarily driven by strong consumer demand, solid booking environment and robust onboard revenue generation. Despite reporting robust results, NCLH shares are down 8.5% in pre-market trading session as its guidance hurt investors’ sentiment.

Earnings & Revenue Discussion

Norwegian Cruise reported adjusted earnings per share of 30 cents, beating the Zacks Consensus Estimate of 27 cents. In the prior-year quarter, NCLH incurred adjusted loss per share of $1.14.

Quarterly revenues of $2,205.5 million outshined the consensus estimate of $2,178 million. The metric jumped 85.8% year over year.

Passenger ticket revenues were $1,478.5 million, up 86.2% year over year. Our model predicted the metric to surge 117.5% year over year. Onboard and other revenues amounted to $727 million, up 84.9% year over year.

Expenses & Operating Results

Total cruise operating expenses grew 28.9% to $1,383.6 million in the quarter under review from the year-ago quarter’s levels. The company reported a rise in payroll, food as well as onboard and other expenses. Our model suggested total cruise operating expenses to increase 22.6% year over year.

During the second quarter, gross cruise costs climbed 44.7% (from 2019 levels) to $1,735.8 million. Adjusted net cruise costs amounted to $857.4 million compared with $661.8 million in the first quarter of 2019. Fuel price per metric ton (net of hedges) declined to $715 from $836 in 2022.

Net interest expenses in the quarter were $177.7 million compared with $144.4 million reported in the year-ago quarter.

Balance Sheet

Cash and cash equivalents, as of Jun 30, 2023, were $899.1 million compared with $947 million at the end of Dec 31, 2022. Long-term debt, as of Jun 30, 2023, came in at $11.99 billion compared with $12.6 billion as of Dec 31, 2022.

Booking Update

Norwegian Cruise stated that cumulative booked position for the second half of 2023 are higher than 2019 levels. Also, it reported strength in advance ticket sales. As of Jun 30, 2023, advance ticket sales balance, including the long-term portion, was $3.5 billion, nearly $167 million more than the prior quarter.

On the other hand, management said that occupancy touched 105% for the second quarter of 2023. NCLH expects 2023 occupancy to be 103.5%, on average.

Guidance

For the third quarter of 2023, Norwegian Cruise anticipates occupancy to be approximately 106%. Capacity Days are expected to be approximately 5.85 million.

During the quarter, adjusted interest expense, and depreciation and amortization are projected to be approximately $185 million and $205 million, respectively. Adjusted EBITDA is estimated to be nearly $730 million.

For the third quarter, adjusted EPS is projected to be nearly 70 cents. The Zacks Consensus Estimate for third-quarter EPS is pegged at 80 cents.

For 2023, NCLH anticipates occupancy to be approximately 103.5%. Capacity Days are expected to be approximately 22.7 million.

During the year, adjusted interest expenses, and depreciation and amortization are expected to be approximately $720 million and $815 million, respectively. Adjusted EBITDA during the year is anticipated in the range of $1.85-1.95 billion compared with the prior estimation of $1.8-1.95 billion.

For 2023, adjusted EPS is projected to be nearly 80 cents. The consensus estimate for 2023 EPS is pegged at 82 cents.

Zacks Rank

Norwegian Cruise currently has a Zacks Rank #2 (Buy).

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