NCLH Misses On Earnings, Lowers Expectations Going Forward

Open Jaw

Norwegian Cruise Line Holdings took a beating on the stock market yesterday, after falling short of analyst expectations in its 2nd quarter and lowering its outlook going forward. 

Despite Q2 revenue growth of 9.3% in the latest period, NCLH fell short of analyst expectations. Its stock price, which has already declined significantly this year, dropped about 9% yesterday.

The company posted a profit of $145.2 million, down from $158.5 million a year earlier. However, the year-earlier period included a benefit of $34.3 million related to the company’s acquisition of Prestige Cruises International Inc.

“While successive geopolitical events dampened North American consumer demand primarily for our Mediterranean itineraries, our management team worked diligently to identify cost saving opportunities to partially mitigate these impacts and generate solid Adjusted EPS growth of 13%,” said NCLH CEO Frank Del Rio. “It was a challenging booking environment where we remained mindful of our go-to-market strategy to minimize discounting and maintain our hard-fought pricing gains, resulting in lower occupancy, which in turn lowered onboard revenue and overall Net Yield growth compared to our expectations earlier in the year.”

Costs excluding fuel increased 4%, which NCLH says was primarily due to 4 scheduled dry-docks in the quarter compared to one in the prior year. Fuel price was a bright spot, down 15.9% net of hedges.

Del Rio says the 1st half of the year was not too bad considering the “significant booking headwinds” experienced. But NCLH is lowering expectations going forward, for both full year 2016 and 2017.

“As we enter the second half of the year, we are revising our earnings expectations primarily as a result of four factors: Continued weak demand from our core North American consumer for European sailings at a time when 1/2 of our fleet is deployed in the region, including 8 of our highest yielding ships; the effect of a weaker £ post the Brexit vote; an adjustment to earlier pricing expectations for Miami-based Caribbean itineraries, which continue to outperform prior year despite a doubling of capacity in the low season months and the impact from maintaining pricing discipline to minimize discounting,” said Del Rio.

A major Q2 bright spot for the cruise company was the launch of Seven Seas Explorer, the 1st new-build for Regent Seven Seas Cruises in over 13 years. The ship, billed as the most luxurious cruise vessel ever built, enjoyed positive reviews.

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