Norwegian Cruise Line (NCLH) stock drops as earnings, revenue miss despite record Q1 bookings
Norwegian Cruise Line (NYSE: NCLH) reported its first-quarter earnings that saw shares drop over 12%. The company's earnings per share (EPS) of $0.04 fell short of analysts' expectations of $0.09, while revenue reached $2.19 billion, just below the consensus estimate of $2.22 billion. Despite this, the cruise operator provided an upbeat full-year earnings forecast, exceeding the consensus.
For the first quarter ended March 31, 2024, Norwegian Cruise Line's revenue saw a 20% increase compared to the same period last year, attributed to an 8% capacity growth. The adjusted EPS of $0.16 surpassed the guidance of $0.12, a significant improvement from the previous year's loss of -$0.30. This performance was driven by robust revenue growth and a continued emphasis on cost reductions and efficiencies.
The company's margin enhancement initiatives have led to a nearly doubled adjusted EBITDA of $464.0 million over the prior year, exceeding the guidance of $450 million. Occupancy rates stood at 104.6% for the quarter, and the total revenue per Passenger Cruise Day increased by approximately 8% compared to the first quarter of 2023. Additionally, the gross margin per Capacity Day was up 53% versus the previous year.
Looking ahead, Norwegian Cruise Line has raised its full-year 2024 guidance, with net yield expected to grow by approximately 6.4% on a constant currency basis, up from the previous estimate of 5.4%. The adjusted EBITDA guidance has increased by $50 million to approximately $2.25 billion, and adjusted EPS guidance has been raised by $0.09 to $1.32, above the analyst consensus of $1.30.
President and CEO Harry Sommer expressed optimism, noting record bookings in the first quarter that have led to an all-time high booked position and an unprecedented level of advance ticket sales. "These achievements demonstrate the continued growing demand we are experiencing for our product and offerings," Sommer stated.
Despite the positive outlook for the year, the immediate market reaction was negative, likely due to the earnings and revenue miss for the quarter. The company's stock moved down 2.85%, reflecting investor sentiment that was mixed in response to the earnings news.
Executive Vice President and CFO Mark A. Kempa highlighted the company's operational efficiency efforts and its progress in deleveraging, with a full turn reduction in net leverage from the end of 2023, ending the quarter at 6.3x. "We plan to continue this trend and expect to reduce Net Leverage 1.5 turns during the year compared to 2023 year-end, marking an important milestone in improving our balance sheet," Kempa said.
Norwegian Cruise Line's financial position remains solid, with liquidity at $2.4 billion at the end of the quarter. The company's total debt stood at $13.7 billion, with a net debt of $13.2 billion.
Following the report, Goldman Sachs said the guidance raise was a little lighter than expected.
"Based on our conversations with investors, the 2024 guidance raise is at the low end of expectations, and 2Q is right in line with the Street," wrote the investment bank in a note. "Though NCLH raised its ‘24 net yield guidance by 100bps, this still implies a relatively steep deceleration in underlying pricing (net per diems) for the remainder of the year."