Norwegian Cruise Line (NCLH) Down 82% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Norwegian Cruise Line (NCLH). Shares have lost about 82% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Norwegian Cruise Line due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Norwegian Cruise Q4 Earnings Top, Covid-19 Clouds View

Norwegian Cruise has reported better-than-expected fourth-quarter 2019 results. The company’s earnings and revenues surpassed the Zacks Consensus Estimate for the fourth consecutive quarter.

Earnings & Revenue Discussion

Adjusted earnings of 73 cents per share surpassed the Zacks Consensus Estimate of 70 cents. However, the bottom line declined 14.1% from the year-ago quarter.

Revenues amounted to $1,480.6 million in the fourth quarter, surpassing the consensus mark of $1,431 million and improving 7.2% year over year. The top line was driven by an increase of 3.4% in passenger ticket revenues and rise of 15.8% in onboard and other revenues.

Strong onboard spending had a positive impact on the reported quarter’s revenues as well. Moreover, an increase in capacity days with the addition of Norwegian Encore to the fleet drove the top line.

Gross yield (total revenues per Capacity Day) rose 4% in the quarter on a year-over-year basis. On a constant-currency (cc) basis, net yield rose 1.3% in the reported quarter.

Expenses & Operating Results

Total cruise operating expenses increased 8.6% in the quarter under review from the year-ago quarter. The increase can be attributed to redeployment of Norwegian Joy and rise in direct costs owing to air promotions.

Gross cruise costs per capacity day rose 5.6%. Adjusted Net cruise costs (excluding fuel) per Capacity Day increased 4% at cc and 3.4% on a reported basis. Fuel price per metric ton (net of hedges) was up 2.4% to $508 in the quarter under review.

Net interest expenses were $73.2 million in the fourth quarter, down from $68.2 million in the year-ago quarter.

Balance Sheet

Cash and cash equivalents as of Dec 31, 2019, were $252.9 million, up from $163.9 million as of Dec 31, 2018. Long-term debt at the end of the fourth quarter totaled $6.1 billion, higher than $5.8 billion at the end of 2018.

Coronavirus to Hurt Q1 & 2020 Results

Due to the coronavirus outbreak in China, the company has canceled, modified or redeployed 40 voyages, which include 24 voyages on Norwegian Cruise Line, 10 on Oceania Cruises and six on Regent Seven Seas Cruises. The company stated that it will not have any vessels deployed in Asia through the end of third-quarter 2020.

The aforementioned factor is expected to impact 2020 adjusted earnings by 75 cents per share. Per management, 2020 results are likely to be materially impacted if apprehensions regarding the coronavirus continue to increase.

For first-quarter 2020, Norwegian Cruise expects adjusted earnings to be nearly 48 cents. Net yield is expected to increase 0.25% at cc. The company expects net cruise costs (excluding Fuel per Capacity Day) to be 4.5% at cc.

For 2020, the company expects adjusted earnings per share in the range of $5.40 to $5.60. The Zacks Consensus Estimate for 2020 earnings is at $5.49, slightly below the mid-point of the company’s guidance of $5.5 per share.

Net yield is expected to be in the range of 2-3%. Meanwhile adjusted net cruise costs are anticipated to be nearly 1.25% at cc.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -98.57% due to these changes.

VGM Scores

Currently, Norwegian Cruise Line has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Norwegian Cruise Line has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.