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Norwegian Cruise (NCLH) Stock Down on Q2 Earnings Miss

Norwegian Cruise Line Holdings Ltd. NCLH reported second-quarter 2020 results, wherein the bottom line missed the Zacks Consensus Estimate but the top line surpassed the same. Moreover, both earnings and revenues declined sharply year over year owing to the coronavirus-induced shutdowns. Following the earnings release, shares of the company are down nearly 4% in pre-market trading session.

Earnings & Revenue Discussion

The company reported adjusted loss per share of $2.78, wider than the Zacks Consensus Estimate of a loss of $2.19. Notably, the company had reported earnings per share of $1.30 in the prior-year quarter.

Revenues of $16.9 million beat the consensus mark of $3 million. However, the figure declined 99% year over year. The downside can be attributed to 98.8% decline in passenger ticket revenues and decrease of 99.4% in onboard and other revenues.

Norwegian Cruise Line Holdings Ltd. Price, Consensus and EPS Surprise Norwegian Cruise Line Holdings Ltd. Price, Consensus and EPS Surprise

Norwegian Cruise Line Holdings Ltd. price-consensus-eps-surprise-chart | Norwegian Cruise Line Holdings Ltd. Quote

Expenses & Operating Results

Total cruise operating expenses increased 68.5% in the quarter under review from the year-ago quarter. The increase can be attributed to costs associated with suspension of cruise voyages, continued payment of protected commissions and crew costs, which include salaries, food and repatriation costs, and fuel.

Gross cruise costs per capacity day declined 0.2%. Adjusted Net cruise costs (excluding fuel) per Capacity Day were down 0.3% at cc. Fuel price per metric ton (net of hedges) was up 20.5% to $594 in the quarter under review.

Net interest expenses were $114.5 million in the first quarter, up from $66 million in the year-ago quarter.

Balance Sheet

Cash and cash equivalents as of Jun 30, 2020, were $2.3 billion, up from $252.9 million as of Dec 31, 2019. Long-term debt at the end of the second quarter totaled $10.3 billion, higher than $6.1 billion at the end of 2019.

Due to the pandemic, the company’s targeted monthly cash burn is on average, nearly $160 million per month. The cash burn estimate is at the high end of previously estimated range due to additional interest expenses.

Outlook

The company has already withdrawn 2020 guidance on account of the temporary suspension of sailings globally. The company stated the pandemic has impacted its financial position and believes that if suspension is further extended its liquidity and financial position will be affected significantly.

The company expects to report net loss both on GAAP and adjusted basis for the third quarter and 2020. Since the beginning of the coronavirus outbreak, the company’s booking remain below historical levels. However, overall cumulative booked position and pricing for 2021 are within historical ranges.

Zacks Rank & Stock to Consider

Norwegian Cruise, which shares space with Royal Caribbean Cruises Ltd RCL and Carnival Corporation & Plc CCL, carries a Zacks Rank #3 (Hold).

A better-ranked stock worth considering in the same space includes Camping World Holdings, Inc. CWH, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Camping World Holdings current year earnings is likely to witness growth of 327.3%.

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