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NCLH misses Q4 by a penny and Prestige costs drag but 2015 outlook is bright

Excluding debt and expenses related to the Prestige Cruises acquisition, Norwegian Cruise Line Holdings' fourth quarter adjusted net income was $77.6m, or 36 cents per share, a penny under the Wall Street consensus. On a GAAP basis, the Prestige costs dragged Q4 to a loss of 12 cents per share. Beyond a challenging first quarter, the company is encouraged by solid pricing and booking trends.

On a Norwegian stand-alone basis, adjusted net income was 40 cents per share, up from 18 cents a year ago.

Excluding the Prestige-related expenses, 2014 adjusted net income was $480.6m, or $2.27 per share, a penny higher than the consensus expectation, while GAAP net income was $338.4m, or $1.62 per share. The Insignia fire in December cost 3 cents per share. On a Norwegian stand-alone basis, adjusted EPS increased 64.5% to $2.32.

Q4 interest expense, net, increased to $56.4m from $24.6m primarily due to costs related to the acquisition of Prestige and the incremental interest expense related to the additional debt.

Q4 revenue was $789m, up from $600m. Full-year revenue increased 21.6% to $3.1bn, from $2.6bn.

CEO Frank Del Rio said that at year end, and as of Tuesday, the company has more booked revenue and the highest net yields on future sailings than ever before, including full year 2015 and 2016. However, expectations for the first quarter are 'tempered' due to the challenging Caribbean capacity and a normalized winter season for the Norwegian brand, which last year included an extended bareboat charter of Norwegian Jade for the Sochi Olympics.

The company projects Q1 EPS in a range of 20 cents to 24 cents. Analysts had been expecting 30 cents per share.

'Looking to the balance of the year, the outlook is much more encouraging with solid pricing and booking trends across all markets. While 2015 is primarily an organic year, we expect to deliver robust adjusted EPS growth of approximately 23%,' Del Rio said.

EPS guidance for the full year is $2.70 to $2.90. This includes a 7-cent impact from the Insignia fire for the whole year, with 5 cents of that in Q1. Analysts were expecting $2.72.

Del Rio said that until recently, the company's booked revenue had been on par with the prior year; however, the last three weeks of this wave season have seen a significant acceleration in booking volume. Norwegian Escape is in a better booked position than sisters Norwegian Breakaway and Getaway, and Seven Seas Explorer has set both single day and single week booking records at Regent Seven Seas Cruises.

At the time of the Prestige acquisition, the company announced cost synergies in the $25m range. Norwegian Cruise Line Holdings reiterated this level for 2015, having identified synergies in the consolidation of office operations, insurance costs, port fees and shore excursion concessionaire contracts.

In addition the company said it has identified revenue synergies of $15m exclusively from opportunities in on-board revenue, for a first year synergy figure of at least $40m, which is embedded in the guidance.

The same items that constitute this $40m synergy in 2015 equate to approximately $50m in 2016, Norwegian said.

Editor's note: Check back later on Wednesday for news following Norwegian's earnings call.

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