Q2: Norwegian Meets Earnings, But Cuts Guidance

Norwegian Cruise Line Holdings (NCLH) saw its shares drop below $40 in morning trading after the company reported reduced Q2 net income over last year and reduced its full year earnings forecast to $3.35 to $3.45 per share from $3.65 to $3.85 given earlier this year.

NCLH said it will also miss its 2017 EPS target of $5, but said it still expects next year’s earnings to be up 15 to 25 percent over this year.

Speaking on today’s earnings call, Frank Del Rio, president and CEO, attributed the results and outlook to a more challenging environment in Europe with the number and magnitude of terrorism incidents deterring Americans from travelling.

Contrary to the other two major cruise companies, Norwegian sources some 70 percent of its passengers from North America. Del Rio said that efforts were underway to replace the drop-off in American demand with European sourcing, but said that was coming at lower ticket prices and lower onboard spend.

Wendy Beck, CFO and executive vice president, said the company expects the European market environment to be the same in 2017 and that other markets will drive earnings.

Norwegian Cruise Line has 28 percent of its capacity in Europe this year, Oceania 87 percent and Regent 81 percent.

The results and forecasts are also impacted by a stronger dollar, or conversely, weaker foreign currencies, according to Del Rio.

In addition, while the strong fundamentals in the Caribbean remains intact, according to Del Rio, he said a strong price increase that was expected did not materialize, due to increased capacity. To balance the capacity, especially in the weaker summer season, he said, next year, the Getaway will move to the Baltic, which he added has always performed strongly. Cuba was not mentioned.

Furthermore, Del Rio said that the NCLH brands are committed to maintaining pricing discipline and avoid discounting.

For Q2, NCL reported net income (GAAP) of $145.2 million, or $0.64 per share, on revenues of $1.2 billion, compared to net income of $158.4 million, or $0.70 per share, on revenues of $1,1 billion.

Its Q2 adjusted EPS of $0.85, beat analysts’ average expectation of $0.83.

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