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NCLH hits Q1 forecasts on Caribbean demand, holds full-year outlook despite Europe softness

Strong Caribbean demand helped Norwegian Cruise Line Holdings deliver first quarter adjusted earnings per share of 38 cents, square on the Wall Street forecast, and the company held its prior guidance for full-year 2016 though softer demand from North Americans for Europe is impacting Q2.

Adjusted EPS grew 41% to 38 cents on adjusted net income of $86.7m, up from $62.6m, or 27 cents per share, driven by strong pricing and the addition of Norwegian Escape in October 2015. Without one-time items, EPS increased to 32 cents on net income of $73.2m, up from a Q1 loss of $21.5m, or 10 cents per share, a year ago.

Revenue rose to a record $1.1bn, up from $938.2m.

NCLH said its current booked position for 2016 is on par with 2015's record levels and at higher prices. Strength in the Caribbean, Alaska, Hawaii and other North American markets is offsetting softness in European itineraries.

Constant currency adjusted net yield increased 3.6%, or 2.5% as reported, driven primarily by solid demand in the Caribbean and strong on-board revenue. If not for a drag from Norwegian Epic in Europe and Pride of America being out of service for drydock, yields would have been up 5%.

NCLH president and ceo Frank Del Rio called it 'another quarter of solid financial performance and significant earnings growth driven primarily by strong pricing with robust demand in the Caribbean driving net yield growth above our expectations.'

He said the company is on track to reach its stated stated targets of $5 adjusted EPS in 2017 and double-digit return on invested capital on an adjusted basis in 2016, growing to 14% by 2018. Since Del Rio had previously stated NCLH would exceed the $5 EPS target next year, it's likely analysts will hone in on this point during today's conference call.

Del Rio added that announcements about the China-dedicated ship Norwegian Joy have been well-received in the Chinese market, giving strong momentum prior to the ship’s 2017 introduction.

Adjusted net cruise cost excluding fuel per capacity day rose 1.5% on a constant currency basis, or 1.1% as reported, mostly due to increased marketing expense and two scheduled drydocks in the quarter, up from one the year before. Fuel price per metric ton, net of hedges, decreased 16.7% to $438 from $526 in 2015. However, NCLH had a loss on its fuel derivatives.

For 2016, continued strong demand in the Caribbean, Alaska, Bermuda and Hawaii is offsetting softness in Europe which comes mainly as a result of lower demand from North American consumers, according to Wendy Beck, evp and cfo.

'While this softness is tempering yield growth mainly in the second quarter, strong bookings and pricing in other core markets, as well as the addition of Seven Seas Explorer to our fleet, are contributing to strong yield performance in the back half of the year, keeping us on track to deliver expected earnings growth of approximately 30%,' Beck continued.

NCLH expects Q2 adjusted EPS in the range of 80 cents to 85 cents, under the consensus forecast of 97 cents per share.

The company held its prior guidance for full-year 2016 adjusted EPS to a range of $3.65 to $3.85. That compares to Wall Street's expectation of $3.77 and is up from the $2.88 EPS in 2015.

NCLH reported booking trends for the first half of 2017 remain strong, at higher prices.