NCLH sees 2016 as 'breakout' earnings year: Wells Fargo

During recent investor meetings the NCLH management tone was 'decidedly bullish,' stating 2016 will be a breakout year for earnings, Wells Fargo Securities said in a note.

When it comes to the booking curve, NCLH reported 196 days versus 158 days for the consolidated company, driven by the Norwegian brand, according to Wells Fargo analyst Tim Conder.

The cruise operator hasn't issued formal guidance for 2016, but Conder said management indicated the higher end of a 3% to 4% increase in constant currency net yields and a 1% to 2% increase in net cruise costs are reasonable assumptions. The higher end of projected net cruise costs figures investments related to China and Cuba.

Wells Fargo said modest share repurchases are increasingly likely in the second half of 2015, with more sizable repurchases in 2016.

NCLH management reaffirmed a 'high degree of confidence' the company will meet its goals of $5 earnings per share in 2017 and a 14% increase in return on invested capital in 2018, Conder said.

The brokerage added a penny to its EPS projections for NCLH this year and next, with the 2015 number going to $2.89 and 2016's to $4.02, reflecting updated net yield, net cruise costs, fuel costs and share repurchase assumptions.

Wells Fargo raised its valuation range for NCLH to $65 to $68, from $63 to $66, and reiterated its 'outperform' (buy) rating.

NCLH shares closed at $61.81, up 41 cents, on Tuesday.