Norwegian Cruise Line Shares Drop Despite Strong Q1 Earnings and Revenue Hike

Norwegian Cruise Line Holdings saw its stock drop by 9% in April, following a mixed first-quarter earnings report that included an earnings beat and elevated guidance, but fell short on revenue expectations. Despite strong bookings and a positive outlook, the market's challenging conditions seemed to affect investor sentiment.

The cruise industry has experienced a remarkable comeback in 2023, with robust demand leading to impressive earnings and share price growth for major players like Norwegian Cruise Line Holdings (NCLH) [1]. However, the company's mixed first-quarter earnings report, which included an earnings beat and elevated guidance but fell short on revenue expectations, triggered a 9% stock drop [1].

Despite strong bookings, which resulted in an all-time high booked position and unprecedented levels of advance ticket sales [1], NCLH's first-quarter revenue came in slightly below estimates at $2.19 billion, just missing the consensus of $2.23 billion [1]. This revenue miss, combined with the challenging market conditions, seemed to have dampened investor sentiment.

The company reported net income of $17.35 million, or 4 cents per share, a significant improvement from the loss of $159.3 million, or 38 cents per share, in the same period last year [1]. Adjusted earnings per share came in at 16 cents, exceeding the FactSet consensus of 9 cents [1].

NCLH's Chief Executive, Harry Sommer, expressed confidence in the company's performance, stating, "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" [1]. In response to the strong earnings and positive outlook, the company raised its full-year adjusted EPS outlook to $1.32 from approximately $1.23 [1].

Despite the positive news, NCLH's stock has experienced a lackluster year-to-date performance, with a 5.6% decline compared to the S&P 500's 5.6% gain [1]. Factors contributing to this underperformance include concerns around cost pressures and potential brand exposure to geopolitical conflicts [2].

In contrast, rival cruise operator Royal Caribbean Group (RCL) has seen its shares grow by 5% this year, as it hiked its profit outlook twice since February, driven by strong demand [2].

References:

[1] MarketWatch. (2023, May 3). Norwegian Cruises stock falls after revenue came up a bit short, despite record bookings. https://www.marketwatch.com/story/norwegian-cruises-stock-falls-after-revenue-came-up-a-bit-short-despite-record-bookings-0c1e22ff

[2] Reuters. (2023, May 1). Norwegian Cruise Line lifts profit target, but shares fall on downbeat revenue. https://www.reuters.com/business/norwegian-cruise-lifts-profit-target-robust-cruise-vacation-demand-2024-05-01/