Norwegian Cruise Line jump 16% as cruise demand remains robust

Norwegian Cruise Line Holdings Ltd. reported mixed Q4 earnings, beating revenue expectations but missing on earnings. The company issued upside guidance for Q1 and FY24, with strong expected growth in Net Yield and Adjusted EBITDA. With a record-high booked position and pricing, the company is well-positioned for continued success in the cruise industry.   Shares are up 16% following the solid results and positive outlook for the industry. 

Norwegian Cruise Line Holdings Ltd. (NCLH) reported a Q4 loss of $0.18 per share, missing the consensus of ($0.12) by six cents. Revenues rose 30.8% year/year to $1.986 billion, beating the consensus of $1.960 billion. 

The company has been experiencing healthy consumer demand, with a record-high booked position and pricing reflective of some of the best booking weeks in the company's history. The company entered the year at an all-time high booked position and pricing for 2024 voyages.

Onboard revenue per Passenger Cruise Day remains robust, up 20% in the quarter compared to 2019, with broad-based strength across all revenue streams. The company's advance ticket sales balance, including the long-term portion, ended 2023 at a year-end record of $3.2 billion, approximately 56% higher than at the end of 2019. 

Adjusted EBITDA in the fourth quarter was approximately $359.6 million, in line with guidance driven primarily by solid revenue performance and lower Adjusted Net Cruise Cost Excluding Fuel.

The company's gross margin per Capacity Day was approximately $79 in the quarter, and Net Yield growth was approximately 8.2%, or 8.6% versus 2019 on a Constant Currency basis, in line with guidance. Gross Cruise Costs per Capacity Day was approximately $280 in the fourth quarter, compared to $311 last quarter. 

For the full year 2024, the company expects Net Yield growth to be strong at approximately 5.4% on a Constant Currency basis compared to 2023. This growth is driven by exceptional demand for Norwegian Cruise Line, with Oceania Cruises and Regent Seven Seas Cruises also experiencing strong demand across all geographies with the exception of voyages redeployed due to conflicts in the Middle East and Red Sea.

Norwegian Cruise Line issued upside guidance for Q1, expecting EPS of ~$0.12, compared to the consensus of ($0.20). The company also issued upside guidance for FY24, expecting EPS of ~$1.23, compared to the consensus of $1.13. 

Net Yield is expected to increase approximately 5.5% as-reported and approximately 5.4% in Constant Currency versus 2023. Adjusted EBITDA is expected to be approximately $2.2 billion.

In 2024, Adjusted Net Cruise Costs Excluding Fuel per Capacity Day is expected to be $159, increasing 3.4% in Constant Currency, which includes an approximately 325 basis points impact of increased Dry-dock days and related costs in the year. Excluding this, Adjusted Net Cruise Cost Excluding Fuel per Capacity Day would be essentially flat year-over-year. 

Full-year Adjusted Net Cruise Cost Excluding Fuel per Capacity Day is expected to be approximately $159, increasing approximately 3.4% in Constant Currency. Excluding the impact of increased Dry-dock days and related costs, Adjusted Net Cruise Cost Excluding Fuel per Capacity Day would be essentially flat year-over-year. Adjusted EBITDA is expected to grow 18% to approximately $2.2 billion during 2023, and Adjusted EPS is expected to grow 76% to approximately $1.23.

The company's ongoing margin enhancement initiative and efforts to maximize revenue opportunities and rightsize its cost base are key drivers of its financial performance. With a record-high booked position and pricing, the company is well-positioned for continued success in the cruise industry. However, investors should consider the current challenging market conditions and the potential impact of geopolitical tensions on the company's operations and financial performance.