Norwegian Cruise Line Sets Sail on Record Bookings Raised EPS

Key Points

• Norwegian Cruise Line reported a Q1 2024 EPS beat of nine cents and revenue growth of 20.3% YOY to $2.19 billion, falling short of $2.23 billion.
• Norwegian Cruise Line raised its full-year 2024 EPS estimates twice in May to $1.43 versus $1.26 consensus estimates.
• Norwegian Cruise Line raised its net yield growth rate to 7.2% YOY, which is robust but still lags competitors Royal Caribbean and Carnival at 9.5%.

Norwegian Cruise Line Holdings Ltd. NYSE: NCLH raised its full-year 2024 EPS guidance for the second time in May 2024 at its Investor Day. While the cruise industry was the epicenter during the COVID-19 pandemic, it’s one of the remaining industries to experience positive normalization as the travel boom continues to flourish.

The consumer discretionary sector giant, along with Carnival Co. and plc NYSE: CCL, is trying to catch up to Royal Caribbean Ltd. NYSE: RCL in terms of profits and performance. 

Here’s the Significance of Net Yields

In the cruise industry, net yields are a key metric to pay attention to. Net yields reflect the profitability of the operations. It represents the average revenue generated per passenger cruise day after expenses and fees like transportation and agent commissions. Passenger revenues include ticket prices and onboard spending, including excursions, merchandise, dining and drinks. Higher net yields indicate robust demand and profitability. The net yield growth rate is a good indicator of what to expect moving forward compared to peers.

Net Yields Improving But Still Lags Peers

Norwegian reported a solid net yield increase of 16.4% YoY in its Q1 2024 earnings report. It originally guided the full year 2024 net yield to grow just 5.4% YOY. It raised its net yield guidance to 6.4% on its Q1 2024 report. Then on its Investor Day on May 20, 2024, Norwegian bumped up its net yield guidance to 7.2% YOY growth. By all accounts, this is a solid improvement. However, it still lags behind the 9.5% net yield growth guidance by both Royal Caribbean and Carnival.

Daily Descending Triangle Pattern

NCLH displays a daily descending triangle pattern. This pattern is comprised of a descending (falling) upper trendline resistance formed at the $21.73 peak on March 27, 2024, capping bounces at lower highs towards the flat-bottom lower trendline support at $15.87. NCLH continues to move closer to the apex point, at which it will inevitably break through the descending upper trendline or break down through the flat lower trendline. The daily relative strength index (RSI) is attempting to bounce at the 40-band. Pullback support levels are at $15.47, $14.14, $12.71 and $11.78.

Robust Q1 2024 Growth

Norwegian Cruise Line reported Q1 2024 EPS of 16 cents versus 9 cents consensus estimates, beating by 7 cents. Revenues rose 20.3% YoY to $2.19 billion, falling short of $2.23 billion consensus estimates. However, adjusted EBITDA nearly doubled YoY to $464 million and above its $450 million guidance. Occupancy was 104.6%, which is in line with guidance.

The company reported record Q1 bookings driving an all-time high 12-month-forward booked position. North American demand for the summer European season remains robust. 

The Fleet in a Nutshell

Norwegian currently has 32 ships in its fleet with around 66,500 berths or beds between its brands, including Norwegian Cruise Lines, Oceania Cruises and Regent Seven Seas Cruises. The company has 13 ships and 41,000 berths on order. Norwegian expects to carry around 2.9 million guests in 2024.

Raising Guidance the First Time

Norwegian raised its Q2 2024 EPS guidance to around 32 cents versus 31 cents consensus estimates. Occupancy is expected to hit 105.7%, and adjusted EBITDA is expected to be around $555 million.

Full year 2024 EPS guidance was raised to around $1.32, up from $1.23, versus $1.28 consensus guidance. Adjusted EBITDA is expected to rise $5 million to $2.25 billion. Full year 2024 net yield growth was raised to 6.4%, up from earlier guidance of 5.4%. Shares promptly fell 13% on the guidance.

Norwegian Cruise Line CEO Harry Sommer commented, “We kicked off 2024 with impressive momentum, with record bookings in the first quarter propelling us to continue our all-time high booked position and an unprecedented level of advance ticket sales. These achievements demonstrate the continued growing demand we are experiencing for our product and offerings.”

Re-Raising Guidance and Long-Term Targets

On May 20, 2024, Norwegian Cruise Line issued raised guidance ahead of its Investor Day. The company raised full-year EPS to $1.42, up from $1.32, vs $1.36 consensus analyst estimates. Net yield was raised to 7.2%, up from 6.4%. Adjusted EBITDA was raised to $2.30 billion, up from $2.25 billion.

The company expects to achieve an adjusted operational EBITDA margin of 39% by the end of 2026. Adjusted EPS is expected to be around $2.45, which represents a 2-year compound annual growth rate (CAGR) of more than 30%. Net leverage is expected to be reduced to the mid-four turn levels, and a record adjusted return on invested capital (ROIC) of 12% is expected to exceed 2020 levels.

Norwegian Cruise Line analyst ratings and price targets are on MarketBeat.