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NCLH posts strong Q2 but lowers full-year guidance

NCL headquarters
Norwegian Cruise Line Holdings posted a better than expected second quarter on higher ticket pricing and on-board spending but forecast full-year earnings lower than Wall Street's expectation due to lost Cuba sailings and a ship's technical issue.

Adjusted net income was $282.1m, or $1.30 per share, compared to Wall Street's $1.26 consensus and the $271.9m, or $1.21 EPS, in the prior year. GAAP net income was $240.2m, or $1.11 EPS, up from $226.7, or $1.01.

Total revenue increased 9.3%, to $1.7bn from $1.5bn.

Full year EPS forecast lowered

Full year adjusted EPS is now expected in the range of $5 to $5.10, lower than Wall Street's $5.18 projection. The new guidance includes a 45-cent adverse impact from the Trump administration's short-notice ban on Cuba cruises and a 7-cent impact from a technical issue on Norwegian Pearl in July. The company had earlier warned of a 35-cent to 45-cent impact from the Cuba changes.

Without Cuba and Norwegian Pearl, NCLH's outlook would have exceeded its May guidance mainly due to revenue outperformance in the second quarter, coupled with a stronger revenue outlook for the back half of the year.

Robust demand

'Continued robust demand for our global brands, along with our strong consumer-focused value proposition, honed revenue management practices and best guest marketing strategy, enabled us to continue to drive ticket pricing higher which, when coupled with strong on-board revenue performance, resulted in record second quarter results,' President and CEO Frank Del Rio said. 'The underlying fundamentals of our business remain strong across all core markets, and we continue to expect record financial results in 2019, despite the impact from the change in federal regulations which resulted in the cessation of premium-priced Cuba sailings.'

NCLH said it is on track to achieve the Full Speed Ahead 2020 targets provided at its 2018 Investor Day.

Second quarter strength

The 9.3% revenue increase was mainly due to the addition of Norwegian Bliss in 2018, along with a net yield increase driven by the repositioning of Norwegian Joy from China to North America, robust on-board spending and strong growth in organic pricing across all core markets.

Net yield rose 5.8% in constant currency and 5% as reported. Total cruise operating expense was up 11.1% due to the addition of Norwegian Bliss and the redeployment of Norwegian Joy. Adjusted net cruise cost excluding fuel per capacity day increased 6.1% in constant currency and 5.1% as reported.

Fuel price per metric ton, net of hedges, increased to $493 from $481 in 2018. The company reported fuel expense of $100.5m in the period.

Third quarter guidance

NCLH projected Q3 adjusted EPS as approximately $2.15, lower than Wall Street's $2.24 consensus. Net yield is forecast to increase approximately 1.75% in constant currency and 1.5% as reported, while net cruise cost excluding fuel per capacity day is projected to be up approximately 8.25% in constant currency and 7.75% as reported.

Share repurchases

'The combination of the continued robust demand environment, the building excitement for the upcoming launches of Norwegian Encore and Seven Seas Splendor and the march towards achieving our Full Speed Ahead 2020 Targets is setting up 2020 to be another milestone year,' EVP/CFO Mark Kempa said.

'We remain committed to maximizing shareholder returns and believe our current valuation does not reflect the strong core fundamentals of our business; therefore, we will be focusing our capital allocation strategy on opportunistic share repurchases.'

NCLH shares were down in trading before market open Thursday. On Wednesday the stock closed at $47.64, up 72 cents.