Norwegian Cruise Line Holdings (NYSE: $NCLH) is a cruise line operator based in the US and domiciled in Bermuda that operates Oceania Cruises, Norwegian Cruise Line, and Regent Seven Seas Cruises as wholly owned subsidiaries. It has a fleet of 28 cruise ships that offer over 490 destinations globally.
On Tuesday, February 27, 2024, Norwegian Cruise Line released its better-than-expected Q423 results to a positive market reception.
Norwegian Cruise Line Q4 Results
For Q423, Norwegian Cruise Line reported revenue of $1.99 billion, a 30.8% Y/Y increase and 1.2% higher than estimates of $1.96 billion. It reported an adjusted net loss of $77.1 million, or an adjusted EPS loss of $0.18, missing estimates of -$0.14 by 33.3%. The reported capacity days were 5.86 million, above estimates of 5.80 million.
However, while Q423 EPS missed estimates, it was a huge improvement from Q422 when the company reported a $439.7 million adjusted net loss and an adjusted EPS of -$1.04. In the quarter, the company reported a GAAP gross margin of 33.5%, a 19.7% increase from Q422.
For FY23, Norwegian Cruise Line generated $8.5 billion in revenue, a 32% increase compared to 2019, while GAAP net income was $166.2 million, or an EPS of $0.39. The positive EPS marked the first time the company had reported a full-year profit since 2019.
It achieved an adjusted EBITDA of $1.861 billion, in line with its $1.860 billion guidance, and an adjusted EPS of $0.70, inclusive of the negative impact of FX.
Focus on Efficiency
Norwegian Cruise Line’s positive full-year net income achievement since 2019 was driven by cost-cutting, and improved operational efficiency. It reported a Gross Cruise Costs per Capacity Day of $301 in FY23, while Adjusted Net Cruise Costs excluding Fuel per Capacity Day fell by 21% to $154 compared to FY22.
The company reported FY23 occupancy of 102.9%, in line with its 102.6% guidance, while total revenue per passenger cruise day grew 18% on an FX-neutral basis compared to 2019.
One of the highlights for FY23 is the company’s addition of three ships to its fleet, the most additions in one year in its history.
Norwegian Cruise Line Balance sheet
The company stated that it was committed to optimizing its balance sheet and cutting leverage. At the end of fiscal 2023, the company’s total debt was $14.1 billion, while total net debt was $13.7 billion. In 2023, it repaid $1.9 billion of its debt, including paying down in full its $875 million revolving loan facility.
The company’s year-end liquidity stood at $2.3 billion, comprising around $402.4 million in cash and cash equivalents, $1.2 billion under its revolving loan facility, and an undrawn backstop commitment of $650 million.
Q1 and FY24 Forecast
In Q1 and FY24, Norwegian Cruise Line forecasts an occupancy of around 104.8% and 105.1%, respectively. The company expects passenger cruise days of 5.85 million at the midpoint in Q1 and 23.50 million in FY24.
It forecasts an adjusted EBITDA of $450 million in Q1 and $2.2 billion in FY24. Norwegian Cruise Line projects an adjusted net income of around $50 million Q1, or an adjusted EPS of $0.12, above analysts’ estimates of $0.20 and an FY24 adjusted net income of $635 million or an adjusted EPS of $1.23.
NCLH Stock Performance
Following the impressive revenue beat and the upbeat guidance that was above expectations, Norwegian Cruise Line stock closed trading on Tuesday, February 27, 2024, 19.84% higher at $19.09 per share. Over the past 12 months, the stock is up 28.81%, compared to the 28.30% S&P 500 Index gain, and it is up 4.20% year-to-date.
Following Tuesday’s gains, the stock is above its 50-day and 200-day moving averages of $17.93 and $17.14, respectively. Its current market cap is $8.12 billion.
Norwegian Cruise Line Stock Forecast
Wall Street analysts give NCLH stock an overall hold rating and forecast an average price of $20.75 in the next 12 months. The most bullish forecast is $32, while the most bearish forecast is $14. The stock’s average price forecast is an 8.70% upside based on the last closing price.
Is NCLH Stock a Buy?
Norwegian Cruise Line’s optimistic forecast for Q1 resonated with investors, sending the stock soaring over 19%. Additionally, its revenue for the fourth quarter narrowly beat estimates, although it missed EPS estimates. It has also returned to a positive EPS for the first time since 2019, with the trend expected to continue in FY24.
On the downside, the company has been burning through cash. It reported a free cash flow of -$388.7 million in the fourth quarter, a -19.6% margin; a huge change from the positive cash flow in the same period last year. The company has one of the worst free cash flow margins of all consumer cyclical category companies on the NYSE, averaging -17.3%.
Based on its upbeat forecast and the analysts’ mostly neutral assessment of the stock, adding NCLH stock to your portfolio could have a positive impact in the long term. However, in the short term, it might be worthwhile to wait on the sidelines.
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